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QZ: African Oligarchs: Africa’s political elites have built the same wealth plundering structures as the colonialists October 14, 2017

Posted by OromianEconomist in Corruption in Africa, Horn of Africa Affairs, Illicit financial outflows from Ethiopia, Uncategorized.
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Odaa Oromoooromianeconomist
AFRICAN OLIGARCHS: Africa’s political elites have built the same wealth plundering structures as the colonialists

The story of corruption in Africa is not new: tens of millions of dollars missing from Kenya’s ministry of health; billions in mining exports never reaching government coffers in the DR Congo; and cabinet members in Nigeria using bribes received in exchange for lucrative government contracts to buy condos in New York and Paris. Corruption is so endemic in Africa that even presidents have publicly expressed their helplessness in fighting the vice.

Yet, a new transnational report shows the systemic nature in which African oligarchs break down existing governance structures in order to loot national wealth. The investigation, carried by the African Investigative Publishing Collective (AIPC) in partnership with Africa Uncensored and ZAM magazine, shows how clientelism and favoritism have badly impacted the state budgets and economies in seven African nations.

Titled The Plunder Route to Panama, the report picks on the huge trove of leaked data from 2016, which showed the secret companiescontrolled by members of Africa’s political and business elite—including intelligence officials, court justices, and even the son of former United Nations secretary general Kofi Annan.

And instead of focusing on multinationals, who are often accused of plundering national resources, the report looks at the behavior of these leaders and their complicity in stealing taxpayers’ money, hindering investigations, and keeping millions impoverished. In most of these cases, leaders extract wealth from their countries and store it outside the continent, often going there for education, medical treatment, and holidays.

“African oligarchs do a lot more than accepting bribes,” AIPC notes. “What we unearthed indicated that these elites have, to some extent, morphed into the very colonialist plunder structures that they replaced.”

In Togo, for instance, the highly strategic phosphate sector is managedfrom the office of president Faure Gnassingbé—selling it to “whomever they want and at which price they want.” The widespread poverty in the west African country is now at the center of protests calling for Gnassingbé, who is in his third term, to leave office. In Botswana, AIPC says that president Ian Khama controls the lucrative tourism industry through the ownership of key agencies along with his relatives and friends, and funnels the returns to offshore accounts.

The situation is similar in Mozambique, where villagers in Montepuez region were violently removed from ruby fields licensed to generals and ministers. In Burundi, generals and powerful businessmen have developed patronage systems within the government—bagging contracts and exporting large caches of unaccounted for gold annually.

In Rwanda and DR Congo, the ruling party and family respectively, privately control and invest in almost all sectors of the economy. In DR Congo, president Joseph Kabila’s family—especially his siblings Jaynet and Zoe—has established a vast business empire that has interests in dozens of companies and brings in hundreds of millions of dollars every year. Crystal Ventures, the Rwandan Patriotic Front’s holding company, dominates the economy investing in everything from real estate to publishing and furniture trading.

Yet, despite hiding these monies in tax havens like Panama, cases of excess and pillage continue to lead to protests and action in African capitals. Many activists are increasingly demanding that laws and policies be enforced, and institutions change the way they behave. An example of this is the protests against president Jacob Zuma of South Africa, whose has faced allegations of corruption—and whose family members were linked to the Panama Papers.

 


Click here to read related article: Fascism: Corruption: TPLF Ethiopia: Inside the Controversial EFFORT

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TPLF Ethiopia’s Regime Money Laundering Activities & Its Networks August 26, 2017

Posted by OromianEconomist in Illicit financial outflows from Ethiopia, Uncategorized.
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Odaa Oromoooromianeconomist

$500,000.00 | TPLF and Money Laundering: The Key Questions to Ask | Must Watch

Ethiopia- Oromia : police apprehended a man traveling with US$541,671

 

Somali-Ethiopian Social and Economic Development Association (SESEDA)  

SESEDA is TPLF’s organization that collects aid money for criminal activities.

Ogaden: Abdi Iley declares secession from Ethiopia if his thief agent won’t get released

caa38-som

tplf-ethiopias-federal-army-abbay-tsehaye-and-samora-yunus-are-architects-of-the-ongoing-ethnic-cleansing-against-oromo-in-south-and-eastern-oromia

Related:

Is usaid helping the people of Ethiopia/Oromia or working with the TPLF mafia regime??

There is gross  Human rights abuse in Ethiopia and the TPLF mafia regime is getting away with torture and killing!!

 

ANALYSIS 

A substantial sum of money has been illegally flowing out of Ethiopia during the last decade. What is even more worrying is not just that the levels of out flows are high but also the sizes of illicit capital outflows have been rising at alarming rates. This rather unique pattern has attracted the attention of the general public as well as those of bilateral and multilateral donor agencies.

I will also attempt to put some flesh on the bones of facts presented in the GFI database. I will do so by shedding some light on the political economy context of the illicit capital outflow (IFFs) from Ethiopia.

Stolen money trails

The natural starting point is to get a sense of magnitude on the levels and trends. The GFI data is summarized and plotted in Fig. 1. For the time being we focus on the total flows, that is the heights of each bar denoting sizes of annual illicit money outflows. The sum of the blue and red colors gives total amount of money illegally moved aboard from Ethiopia during that year. This ranged from USD $0.4 billion in 2004 to USD $5.6 billion in 2010.

The average annual outflow was $2.6 billion during 2004 and 2013. This is a sizeable sum of money by any standard. For instance, according to estimates reported by the World Bank, the amount of official development assistant (ODA) Ethiopia received in 2010 was $4 billion but total amount of IFFs during that year was $5.6 billion.

This means in 2010 alone Ethiopia’s IFFs exceeded the ODA it received that year by $1.6 billion. In other words, Ethiopia’s IFFs amounted to diverting the entire aid money of 2010 to foreign banks and then still transfer abroad an additional sum of money.

During the entire period (2004 to 2013) the total amount of money that Ethiopia lost due to IFF was $26 billion. This amounts to stealing nearly $300 per citizen. Alternatively, the size of stolen money was about 11 times the total the amount of emergency aid being sought from donors in the current year to buy cereals from abroad and feed the drought victims.

Potential culprits

One may wonder – who are the culprits responsible for Ethiopia’seconomic fraud at such massive scale? The GFI categorizes possible perpetrators into three groups: (a) financial institutions; (b) complicit business counterparts, mainly importers and exporters; and (c) government officials.

In the Ethiopian case, it is reasonable to exclude financial institutions because there is no foreign bank operating in Ethiopia, and the domestic private banks are extremely tightly controlled. Ethiopia’s most influential banks, the Commercial Bank of Ethiopia (CBE) and the National Bank of Ethiopia (NBE), are owned and run by the government. Therefore, in the context of Ethiopia it is safe to include (a) under (c).

That is to say Ethiopia’s IFF can only be undertaken by importers, exporters or government officials. One would hasten to add that there is a huge extent of overlaps between government officials and big businesses in Ethiopia, since big businesses are highly interconnected with the government and/or they are directly or indirectly owned and run by government officials.

Money diversion channels

Now we can shift our attention back to fig. 1 and consider the breakdowns of the IFFs, the individual component denoted by the blue and red sections in each bar. The GFI applies a methodological framework that accounts for two types of illegal movements of money from one country to another.

The first one is export or import trade misinvoicing. This is measured by using a methodology called Gross Excluding Reversals (GER). This simply mirrors exports by one country with imports of another country and vice versa. For instance, items of imports recorded by Ethiopia should agree with records of exporters to Ethiopia in all aspects – value, quantity and quality.

The second one is various leakages in the balance of payments, measured by using the “hot money narrow” (HMN) approach.The latter one is often referred to as “net errors and omissions” in the balance of payment jargon. For instance, if a donor agency or country recorded $1 million grants to Ethiopia but this does not appear in the records by the authorities in Ethiopia, then the GFI records this as a leakage from Ethiopia’s balance of payment.

It is clear from Fig. 1 that the bulk of illicit money transfer from Ethiopia has taken place using trade misinvoicing, denoted by the blue component of the bar. In 2004, trade misinvoicing constituted only 14% of the total IFFs. In 2013, however, this proportion has grown to 100%, the entire IFFs began to be accounted for more and more by trade misinvoicing. For the entire period under discussion, $19.7 billion (or 76% of the total IFFs) was conducted through trade misinvoicing. The year 2010 is an exception – diversion of “hot money” dominated in that year; it constituted 55% of the total IFFs.

False invoices

Trade misinvoicing can take place in one of the following four ways: over invoicing exports, under invoicing exports, over invoicing imports and under invoicing imports. In Ethiopia’s case, the GFI report indicated import over-invoicing is by far the most important method of transferring money abroad. During the period under analysis, about $19.7 billion was transferred abroad through import over-invoicing.

It is critical to understand how import misinvoicing hurts the Ethiopian economy. This is important in the context of huge public construction projects with substantially large components of imports of machinery and other equipment. For instance, an acquisition of a set of machinery whose real value is $1 million is recorded with inflated invoice of $1.5 million.

The importer allocates project budget at the inflated import value, pays the real value to the supplier and then siphons-off the difference (in this case $0.5 million) and deposits it in a foreign bank account. The real damage to the economy happens in terms of inflated capital expenditure. Perhaps the opportunity large capital projects provide for corrupt officials could be the ulterior motive for the uncontrollable urge to attach such a high priority to large capital projects in economic development strategies.

However, it should be noted that public capital projects are often financed through commercial loans that should be paid back with cumulative interests in years to come. The economic return to capital project would partly depend on the cost consideration at project implementation stage.

The GFI also finds some export trade misinvoicing in Ethiopia’s foreign trade, over-invoicing by $6.5 billion as well as $3 million under-invoicing. In trade based money laundering, the most common types of misinvoicing are import over-invoicing and export under-invoicing. As noted above, the case of import invoicing has no complications – so much over invoicing has taken place and it explains the bulk of trade based money laundering in Ethiopia. However, the case of export over-invoicing is uncommon.

Export over-invoicing do happen although they are rare, e.g. China’s trade with Hong-Kong. Export over-invoicing is required when there is a need to plough back money from abroad and report it as inflated foreign direct investment. This is likely the case with Ethiopia where the authorities have been desperate to report higher foreign investments particularly in the first half of the period under analysis.

Ethiopia’s capital flights dwarfs rest of developing countries

It would prove useful to know how bad Ethiopia’s IFFs is relative to other countries. Fig. 2 below compares Ethiopia with its neighbors, the rest of Sub-Saharan Africa (SSA) as well as the average of developing countries (DCs). The comparison was done by expressing total illicit money outflowas percentage of GDP. The years are grouped into three intervals. For reasons discussed further below, it would prove useful to contrast pre- and post-2005. Accordingly, I have isolated 2004 and then divided the remaining years into two equal intervals.

This revealed astonishing patterns of illicit money outflow from Ethiopia which starkly contrasted with those for other countries. First, throughout the years Ethiopia’s records considerably exceeded those for its two immediate neighbors, Kenya and Tanzania. Second, a comparison of 2004 across the countries shows that Ethiopia’s illicit money outflow was way below the Uganda, SSA, and the DCs averages.

Third, the situation changed dramatically from 2005 onwards. Ethiopia outstripped Uganda, and then closed the gap with the SSA average. Fourth, Ethiopia’s average annual money outflows between 2010 and 2013 reached 11% of the country’s GDP, considerably exceeding the corresponding figures for the other countries – SSA (5%), DCs (4%), Uganda and Tanzania (2%) and Kenya (0.013%). Fifth, it is important to note that illicit money transfers abroad constituted smaller and smaller percentages of GDP for most countries over the years, implying substantial improvements in transparency in their economic management. The situation in Ethiopia sharply contrasts with this reality – illicit money outflow becoming a larger and larger percentage of Ethiopia’s GDP. This indicates transparency in Ethiopia’s economic management has gone from bad to worse over the years.

Tyranny, Debt & Underdevelopment: Ethiopian Rail Corporation’s Debt: How Big Is It? January 31, 2017

Posted by OromianEconomist in Illicit financial outflows from Ethiopia.
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Odaa OromooOromianEconomist
ethiopian-rail-corporation-debt
The Ethiopian Reporter (ER) newspaper has been presenting shocking facts about extents of corporate bankruptcies. These have escalated particularly since #OromoProtests started in November 2015. Such reports are becoming commonplace so much that we do not even pay much attention to them. We have been reading about a series of scandals related to Sugar Corporation, METC (the Military Engineering Complex), and lately that of the Ethiopian Railway Transport Corporation (ERC).
In this piece, I will briefly comment on the latest scandal, related to ERC’s murky finance. The ER stated quoted ERC management report and presented troubling accounts of the corporation’s escalating debt, currently standing at birr 102.5 billion or USD 4.6 billion. Let’s put this figure in a context – how big is it relative to the size of the Ethiopian economy?
  • Birr 1,031 or USD 46, if expressed as debt per person (dividing the figure by population of Ethiopia)
  • 7.4% of GDP (expressing it as a ratio to Ethiopia’s national income)
  • About 50% of the income generated in the whole of Ethiopia’s industrial sector
  • 180% of the whole of Ethiopia’s manufacturing sector (nearly twice the size of total income generated in the manufacturing sector, including small scale handcrafts)
By any stretch of imagination, ERC’s debt is a colossal figure. It is not something that Ethiopians would take as yet another financial scandal regading some corporate entity. At the end of the day, it is Ethiopians who would foot this bill. After all the money does not simply melt away, it must have been pocketed by some group who have been busy siphoning off public money. It is not without reason that the authorities have been so much addicted to mega projects. Such big projects have been convenient mechanisms for embezzlement.
We all recall circumstances through which the Addis Rail was started. A very large construction project was completed, completely revamping the Addis Road Networks. Though expensive, this was necessary. The ring road and the rest were completed. However, Addis residents barely started driving on the new and fresh looking roads when the government came up with some crazy idea – yet another mega project, a gigantic city rail network!
Ironically the rail infrastructure was put in place by digging up the newly build asphalt roads. It was madness. A logical next step would have been a tram rail system, which requires only a minor modification – burying the rails in the asphalt road so that the roads would be shared by trams and other vehicles. That option was not acceptable to the authorities because it was not big enough to generate perpetual business opportunities for their cronies.
Now we witness a rather ridiculous situation. By coincidence, the day the Addis Rail started operating, I was back home. The next day, as I was driving in Addis, I witnessed something sounding a comedy show – only one coach rail was moving up on that ugly structure. Well, in that case, if it is only a single coach that moves on it, then what is the point putting up that amorphous structure? I hear the number of coaches moving on those rail networks has been two, three, or four at most.
The bottom line is this. That kind of system can be supported only by a vibrant economy – a healthy economy that generates decent income for citizens! In a normally functioning and genuinely rapidly growing economy, business opportunities expand in all corners of a large city like Addis Ababa. This induces movements of people, commuting between their places of work and residences as well as between premises to do business. In the process income is generated and their capacity to pay for fares get enhanced. If all these things are in place, the public transport sector such as the ERC can balance its books, including meeting its domestic as well as foreign debt obligations.
The situation in Ethiopia is quite different, in fact rather perverse. To begin with, the Ethiopian Economy is growing rapidly only on paper and in official government statistics. The fact on the ground tells the exact opposite. There isn’t much vibrant business opportunity. People wish to travel but that wish remains only a desire – government policy has curtailed their capacity to pay fares at a rate that would make ERC profitable. So, ERC operates at much smaller rate than its full capacity, perhaps 10% to 20%. If circumstances would not change, ERC will never ever able to pay its debt. The principal and interest will accumulate and debt would escalate, as it already has, leaving behind a level of debt whose size will become larger and larger over the years as a share of GDP, industry and manufacturing. The debt per citizen will most certainly become even larger.
It should be noted here I confined my analysis only to the case of ERC. If I closely examine the implications of other financial scandals, it is possible to reveal how alarming each case is. In a nutshell the whole of the Ethiopian economy is in a dire state, whose severity is much more grave than most Ethiopians and the donor community may realize. The sooner the on-going madness is put to stop the better.

RUSH FOR THE EXITS: WHY IS ETHIOPIA’S CAPITAL FLIGHT ACCELERATING? May 11, 2016

Posted by OromianEconomist in Africa, Corruption, Corruption in Africa, Economics, Illicit financial outflows from Ethiopia.
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Odaa Oromoo

Addis Standard

The TPLF Corruption network

 

According to estimates reported by the World Bank, the amount of official development assistant (ODA) Ethiopia received in 2010 was $4 billion but total amount of IFFs during that year was $5.6 billion.

This means in 2010 alone Ethiopia’s IFFs exceeded the ODA it received that year by $1.6 billion.  In other words, Ethiopia’s IFFs amounted to diverting the entire aid money of 2010 to foreign banks and then still transfer abroad an additional sum of money. During the entire period (2004 to 2013) the total amount of money that Ethiopia lost due to IFF was $26 billion. This amounts to stealing nearly $300 per citizen.  Alternatively, the size of stolen money was about 11 times the total the amount of emergency aid being sought from donors in the current year to buy cereals from abroad and feed the drought victims.


 

RUSH FOR THE EXITS: WHY IS ETHIOPIA’S CAPITAL FLIGHT ACCELERATING?

 

By J. Bonsa (PhD), Special to Addis Standard,  9 May 2016

A substantial sum of money has been illegally flowing out of Ethiopia during the last decade. What is even more worrying is not just that the levels of out flows are high but also the sizes of illicit capital outflows have been rising at alarming rates. This rather unique pattern has attracted the attention of the general public as well as those of bilateral and multilateral donor agencies.

I will also attempt to put some flesh on the bones of facts presented in the GFI database. I will do so by shedding some light on the political economy context of the illicit capital outflow (IFFs) from Ethiopia.

Stolen money trails

The natural starting point is to get a sense of magnitude on the levels and trends.  The GFI data is summarized and plotted in Fig. 1.  For the time being we focus on the total flows, that is the heights of each bar denoting sizes of annual illicit money outflows.  The sum of the blue and red colors gives total amount of money illegally moved aboard from Ethiopia during that year.  This ranged from USD $0.4 billion in 2004 to USD $5.6 billion in 2010.

 

The average annual outflow was $2.6 billion during 2004 and 2013. This is a sizeable sum of money by any standard.  For instance, according to estimates reported by the World Bank, the amount of official development assistant (ODA) Ethiopia received in 2010 was $4 billion but total amount of IFFs during that year was $5.6 billion.

This means in 2010 alone Ethiopia’s IFFs exceeded the ODA it received that year by $1.6 billion.  In other words, Ethiopia’s IFFs amounted to diverting the entire aid money of 2010 to foreign banks and then still transfer abroad an additional sum of money.

During the entire period (2004 to 2013) the total amount of money that Ethiopia lost due to IFF was $26 billion. This amounts to stealing nearly $300 per citizen.  Alternatively, the size of stolen money was about 11 times the total the amount of emergency aid being sought from donors in the current year to buy cereals from abroad and feed the drought victims.

Potential culprits

One may wonder – who are the culprits responsible for Ethiopia’seconomic fraud at such massive scale?  The GFI categorizes possible perpetrators into three groups: (a) financial institutions; (b) complicit business counterparts, mainly importers and exporters; and (c) government officials.

In the Ethiopian case, it is reasonable to exclude financial institutions because there is no foreign bank operating in Ethiopia, and the domestic private banks are extremely tightly controlled.  Ethiopia’s most influential banks, the Commercial Bank of Ethiopia (CBE) and the National Bank of Ethiopia (NBE), are owned and run by the government.   Therefore, in the context of Ethiopia it is safe to include (a) under (c).

That is to say Ethiopia’s IFF can only be undertaken by importers, exporters or government officials.  One would hasten to add that there is a huge extent of overlaps between government officials and big businesses in Ethiopia, since big businesses are highly interconnected with the government and/or they are directly or indirectly owned and run by government officials.

Money diversion channels

Now we can shift our attention back to fig. 1 and consider the breakdowns of the IFFs, the individual component denoted by the blue and red sections in each bar. The GFI applies a methodological framework that accounts for two types of illegal movements of money from one country to another.

The first one is export or import trade misinvoicing. This is measured by using a methodology called Gross Excluding Reversals (GER).  This simply mirrors exports by one country with imports of another country and vice versa.  For instance, items of imports recorded by Ethiopia should agree with records of exporters to Ethiopia in all aspects – value, quantity and quality.

The second one is various leakages in the balance of payments, measured by using the “hot money narrow” (HMN) approach.The latter one is often referred to as “net errors and omissions” in the balance of payment jargon. For instance, if a donor agency or country recorded $1 million grants to Ethiopia but this does not appear in the records by the authorities in Ethiopia, then the GFI records this as a leakage from Ethiopia’s balance of payment.

It is clear from Fig. 1 that the bulk of illicit money transfer from Ethiopia has taken place using trade misinvoicing, denoted by the blue component of the bar. In 2004, trade misinvoicing constituted only 14% of the total IFFs.  In 2013, however, this proportion has grown to 100%, the entire IFFs began to be accounted for more and more by trade misinvoicing. For the entire period under discussion, $19.7 billion (or 76% of the total IFFs) was conducted through trade misinvoicing.  The year 2010 is an exception – diversion of “hot money” dominated in that year; it constituted 55% of the total IFFs.

False invoices

Trade misinvoicing can take place in one of the following four ways: over invoicing exports, under invoicing exports, over invoicing imports and under invoicing imports. In Ethiopia’s case, the GFI report indicated import over-invoicing is by far the most important method of transferring money abroad. During the period under analysis, about $19.7 billion was transferred abroad through import over-invoicing.

It is critical to understand how import misinvoicing hurts the Ethiopian economy.  This is important in the context of huge public construction projects with substantially large components of imports of machinery and other equipment. For instance, an acquisition of a set of machinery whose real value is $1 million is recorded with inflated invoice of $1.5 million.

The importer allocates project budget at the inflated import value, pays the real value to the supplier and then siphons-off  the difference (in this case $0.5 million) and deposits it in a foreign bank account. The real damage to the economy happens in terms of inflated capital expenditure.  Perhaps the opportunity large capital projects provide for corrupt officials could be the ulterior motive for the uncontrollable urge to attach such a high priority to large capital projects in economic development strategies.

However, it should be noted that public capital projects are often financed through commercial loans that should be paid back with cumulative interests in years to come. The economic return to capital project would partly depend on the cost consideration at project implementation stage.

The GFI also finds some export trade misinvoicing in Ethiopia’s foreign trade, over-invoicing by $6.5 billion as well as $3 million under-invoicing. In trade based money laundering, the most common types of misinvoicing are import over-invoicing and export under-invoicing. As noted above, the case of import invoicing has no complications – so much over invoicing has taken place and it explains the bulk of trade based money laundering in Ethiopia.  However, the case of export over-invoicing is uncommon.

Export over-invoicing do happen although they are rare, e.g. China’s trade with Hong-Kong.  Export over-invoicing is required when there is a need to plough back money from abroad and report it as inflated foreign direct investment. This is likely the case with Ethiopia where the authorities have been desperate to report higher foreign investments particularly in the first half of the period under analysis.

 

Ethiopia’s capital flights dwarfs rest of developing countries

 

It would prove useful to know how bad Ethiopia’s IFFs is relative to other countries.  Fig. 2 below compares Ethiopia with its neighbors, the rest of Sub-Saharan Africa (SSA) as well as the average of developing countries (DCs). The comparison was done by expressing total illicit money outflowas percentage of GDP.  The years are grouped into three intervals. For reasons discussed further below, it would prove useful to contrast pre- and post-2005. Accordingly, I have isolated 2004 and then divided the remaining years into two equal intervals.

This revealed astonishing patterns of illicit money outflow from Ethiopia which starkly contrasted with those for other countries.  First, throughout the years Ethiopia’s records considerably exceeded those for its two immediate neighbors, Kenya and Tanzania. Second, a comparison of 2004 across the countries shows that Ethiopia’s illicit money outflow was way below the Uganda, SSA, and the DCs averages.

Third, the situation changed dramatically from 2005 onwards.  Ethiopia outstripped Uganda, and then closed the gap with the SSA average. Fourth, Ethiopia’s average annual money outflows between 2010 and 2013 reached 11% of the country’s GDP, considerably exceeding the corresponding figures for the other countries – SSA (5%), DCs (4%), Uganda and Tanzania (2%) and Kenya (0.013%).  Fifth, it is important to note that illicit money transfers abroad constituted smaller and smaller percentages of GDP for most countries over the years, implying substantial improvements in transparency in their economic management. The situation in Ethiopia sharply contrasts with this reality – illicit money outflow becoming a larger and larger percentage of Ethiopia’s GDP.  This indicates transparency in Ethiopia’s economic management has gone from bad to worse over the years.

 

It should be noted that the SSA average is largely driven by money being squandered by oil and other mineral resources exporting countries such as Nigeria and Angola. It is telling to note that Ethiopia, a country not known for exporting substantial mineral resources, is now characterized by illicit money outflow to GDP ratio exceeding that of an average SSA country.

Blind spots in accounting for remittance flows

The analysis in the preceding sections relied entirely on the Global Financial Integrity (GFI) report.  GFI methodology is strictly confined to official records as starting points and then mirrors records at different places and times. Systemic discrepancies between records are then registered as illicit transactions.

Clearly, then the GFI methodology does not account for illicit money flows that take place through financial transactions in informal or black markets. Remittance flows are riddled with black markets in hard currencies. The situation is even worse in the context of Ethiopia, where official hard currency flows are tightly controlled, and hence creating conditions for prevalence of underground currency transactions.

To the extent that remittances are channeled through formal banking or foreign exchange offices, then the transactions get into the balance of payment records.  Leakages from the flow are accounted for through the GFI approach called “hot money” discussed earlier.

However, there are strong evidences indicating that the bulk of remittance transfers to Ethiopia actually happen through informal channels, mainly because of better rates and lower costs.

The informal channels may take one of two forms.  First, it is common for  Ethiopians living abroad to take hard currencies with them every time they visit home and then directly exchange it to birr in local black markets at better rates by avoiding transfer fees. It also happens that they send hard currencies via travellers they trust so that they give it to their relatives, who in turn get it converted in local black markets. The World Bank estimated that 14% of Ethiopians to whom money was transferred from abroad in 2010 got it through travelers. Since the World Bank has not made a reference to money converted at local black markets, it means the total amount of hard currencies entering Ethiopia by informal channels is much higher than the 14% who regularly receive remittances.

Additionally, there is a more sophisticated black market which operates pretty much like the way foreign money transfer services operate, except that these are operated informally by individuals living abroad. As any Ethiopian living abroad can tell, every big city countries with hard currencies has  a few black market operators who offer exchanges of foreign currencies to birr with additional incentives,at least two or three birr on top of the going rate that money transfer agencies offer.

I selected a couple of major cities and gathered background information for this piece. The margins offered vary across time and space but the current margin on above Western Union conversion rates were at least one birr per unit of USD equivalents of local currencies in London, Dubai, and Kuwait, excluding foreign exchange office fees charged per transaction. This means Ethiopians living abroad have good enough incentive to look for black market operators rather than sending money through formal channels.

The role of the black market is simply to collect and bulk the hard currencies.  Where exactly the collected money goes is anybody’s guess.  One may hope that importers who face constraints in foreign exchange rationing may smuggle out the hard currency they collected and/or importers may assign agents in foreign countries to collect and bulk hard currencies for them.

In both cases importers may spend the money they bulked on purchasing goods and services that will eventually enter Ethiopia. This is an optimistic scenario since the country may eventually benefit from availability of goods and services in the domestic market, except that the transactions were done informally and the government might have lost some tax revenues.

The upshot of this discussion, however, is that the hard currencies collected from local black markets may get smuggled out and get deposited in foreign bank accounts. Similarly, black market operators residing abroad may also be primarily motivated by a pressing need to convert birr into a hard currency and safely deposit it in a foreign bank account.

It should be noted that the GFI methodology misses out such blind spots in remittance flow accounting, which means Ethiopia’s capital flights discussed in the preceding sections is highly likely to underestimate the size of illicit capital flights from Ethiopia. If so much has been done to move money illegally abroad by abusing formal channels, then it is realistic to assume that the informal channels are even more susceptible to abuses by the same group of actors who seem to be in a rush to the exits.

Why the rush?

 At this juncture it is appropriate to pool together different lines of discussions in the preceding paragraphs. The most crucial point here is the timing of dramatic changes in Ethiopia’s capital flight. It is clear from the facts presented in this piece that 2005 was a watershed moment in Ethiopia’s capital flight history in recent years.

For those who closely follow Ethiopia’s political and economic affairs, the fact that dramatic things began to happen soon after 2005 does not come as a surprise.  The general election of that year and the upheavals that followed had seriously shaken self-confidence among the elites who held political and economic power. The possibility of losing power and economic advantages that accrues from it began to be felt starting from that year, when the ruling EPRDF snatched power under murky conditions from the hand of the opposition who claimed they actually won the general election.

This argument is substantiated by the following logical reasoning established in our discussions earlier. In the Ethiopian context there are no foreign banks, and domestic banks are very tightly controlled by the government. Also, there is a great deal of overlaps between interests of big businesses and those of government officials.

In that case, corrupt government officials and their affiliated businesses are the likely culprits for capital flights from Ethiopia at such epic proportions. The fact that rampant corruption has crippled the current government is openly debated in local media and among the elite at official forums. The evidence provided in this piece only corroborates the ongoing public debate.


ED’s Note: J. Bonsa is an economist by training. He can be reached at dinade0612@gmail.com.

Rush for the exits: Why is Ethiopia’s capital flight accelerating?

Illicit financial outflows from Ethiopia: Migrant Workers Find $356,246 In Chinese Airport, Return Cash Back To Owners: Three Woyane (TPLF) travelers claimed the lost money. It was wrapped up with Ethiopian Airlines official bag April 11, 2016

Posted by OromianEconomist in Illicit financial outflows from Ethiopia, Uncategorized.
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Odaa Oromoo

Three Woyane travelers claimed the lost money. It was wrapped up with Ethiopian Airlines official bag

(National Helm) — Two Chinese migrant workers found $356,246 cash in airport and returned it to three travelers from‪ Ethiopia. The migrant workers who were working on a construction project in southern China‬‘s Guangzhou Baiyun International Airport Friday found a white paper bag containing bulks of US dollar bills unattended.

The workers reported the situation to the police and later on met three Ethiopian travelers who came to claim the lost. The migrant workers’ move won lots of praises after the story went viral.


 

http://www.nationalhelm.net/2016/04/migrant-workers-find-356246-in-chinese.html


 

Ethiopia listed among the most corrupt Countries in the world according to Transparency International 2016 Report February 7, 2016

Posted by OromianEconomist in Corruption, Ethiopia's Colonizing Structure and the Development Problems of People of Oromia, Illicit financial outflows from Ethiopia, Uncategorized.
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Odaa OromooThe TPLF Corruption network

The 2015 Corruption Perceptions Index clearly shows that corruption remains a blight around the world. But 2015 was also a year when people again took to the streets to protest corruption. People across the globe sent a strong signal to those in power: it is time to tackle grand corruption.

 José Ugaz,  Chair, Transparency International


 

Ethiopia is listed among the countries in the world where corruption highly prevails. According to Transparency International’s Corruption Perception Index, Ethiopia ranks 103 out of 168 countries and territories included in this year’s index.This doesn’t come as a surprise to many as Ethiopia has been for two decades under the control of a bunch of corrupt officials who are deafening us with the ‘11% economic growth’ mantra while millions of Ethiopians are starving to death.These corrupt officials are killing, torturing and imprisoning citizens in hundreds and thousands because they challenged their corrupt attitudes and their endless greed for wealth and power.


 

Source: Ethiopia listed among the most corrupt Countries in the world according to Transparency International 2016 Report


 

Related:-

TPLF/EPRDF Ethiopian Regime is a Contra to a Developmental State

https://oromianeconomist.wordpress.com/2016/01/12/tplfeprdf-ethiopian-regime-is-a-contra-to-a-developmental-state/

The Conflict between the Ethiopian State and the Oromo People, by Dr. Alemayehu Kumsa

https://oromianeconomist.wordpress.com/2014/08/14/the-conflict-between-the-ethiopian-state-and-the-oromo-people-by-dr-alemayehu-kumsa/


 

In drought (famine) ravaged Ethiopia there is a thin line between life and death. The last decent rains fell here two years ago. Families watch their animals die and wonder if they are next. October 22, 2015

Posted by OromianEconomist in Famine in Ethiopia, Food Production, Free development vs authoritarian model, Illicit financial outflows from Ethiopia, Land Grabs in Africa.
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???????????Famine in Ethiopia 2015povertyAfrica is still struggling with povertyTPLF Ethiopian forces destroyed Oromo houses in Ada'a district, Central Oromia, July 2015Tigrean Neftengna's land grabbing and the Addis Ababa Master plan for Oormo genocide

“…UN now warning that without action some “15 million people will require food assistance” next year, more than inside war-torn Syria.  ….Hardest-hit areas are Ethiopia’s eastern Afar and southern Somali regions, while water supplies are also unusually low in central and eastern Oromo region.” Unicef

Millions hungry as Ethiopia drought bites

(Unicef,  News24, October 22,  2015): The number of hungry Ethiopians needing food aid has risen sharply due to poor rains and the El Nino weather phenomenon with around 7.5 million people now in need, aid officials said on Friday.

That number has nearly doubled since August, when the United Nations said 4.5 million were in need – with the UN now warning that without action some “15 million people will require food assistance” next year, more than inside war-torn Syria.

“Without a robust response supported by the international community, there is a high probability of a significant food insecurity and nutrition disaster,” the UN Office for the Coordination of Humanitarian Affairs, OCHA, said in a report.

The UN children’s agency, Unicef, warns over 300 000 children are severely malnourished.

The Famine Early Warning Systems Network (FEWS NET), which makes detailed technical assessments of hunger, predicted a harvest “well below average” in its latest report.

“Unusual livestock deaths continue to be reported,” FEWS NET said. “With smaller herds, few sellable livestock, and almost no income other than charcoal and firewood sales, households are unable to afford adequate quantities of food.”

Ethiopia, Africa’s second most populous nation, borders the Horn of Africa nation of Somalia, where some 855 000 people face need “life-saving assistance”, according to the UN, warning that 2.3 million more people there are “highly vulnerable”.

El Nino comes with a warming in sea surface temperatures in the equatorial Pacific, and can cause unusually heavy rains in some parts of the world and drought elsewhere.

Hardest-hit areas are Ethiopia’s eastern Afar and southern Somali regions, while water supplies are also unusually low in central and eastern Oromo region.

Sensitive issue

Food insecurity is a sensitive issue in Ethiopia, hit by famine in 1984-85 after extreme drought.

Today, Ethiopia’s government would rather its reputation was its near-double-digit economic growth and huge infrastructure investment – making the country one of Africa’s top-performing economies and a magnet for foreign investment.

Still, nearly 20 million Ethiopians live below the $1.25 poverty line set by the World Bank, with the poorest some of the most vulnerable to weather challenges.

Ethiopia’s government has mobilised $33m in emergency aid, but the UN says it needs $237m.

Minster for Information Redwan Hussein told reporters at a recent press conference that Ethiopia is doing what it can.

“The support from donor agencies has not yet arrived in time to let us cope with the increasing number of the needy population,” he said.

http://www.news24.com/Multimedia/Africa/Malnutrition-in-Ethiopian-children-20110916

http://www.news24.com/Africa/News/Millions-hungry-as-Ethiopia-drought-bites-20151002

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Jiraattonni aanaaAdaamii Tulluu , gargaarsa dhabanii beelaan miidhamaa jiru.

OMN:Oduu Onk. 21,2015 Beelli godinaalee Oromiyaa hedduu miidhaa jiru, gara godina Shawaa bahaa aanaa Adaamii Tulluu Jidduu Kombolachaa jedhamutti, babaldhatee akka jiru himame.

Jiraattonni aanaa kanaa, gargaarsa dhabanii beelaan miidhamaa jiraachuu isaanii dubbatan.

Beelli Oromiyaa godinaalee adda addaa keessatti bara kana namootaa fi loon miidhaa jiru, ammas kan hin dhaabbanne ta’uun himamaa jira.

Haaluma kanaan gara godina Shawaa Bahaa aanaa Adaamii Tulluu Jidduu Kombolchaatti babaldhatee akka jirullee jiraattonni dubbatan.

Jiraataan aanichaa tokko OMN f akka himanitti, rooba dhabameen wal qabatee, hoongee uumameen, namoonni hedduun araddaalee gara garaa keessa jiraatan, beelaaf saaxialamanii jiru.

Bara kana keessa bokkaan si’a lama qofa reebe kan jedhan namni kun, sababa kanaan namoonni midhaan facafachuu qaban, nyaataaf oolfataniiru.

Kan hafe ammoo kafaltii xaa’oo akka baasaniif wayta mootummaan dirqisiiseetti, midhaan facafachuuf qopheeffatan gurguranii baasiif kennanii jiru.

Namoonni hedduun qabeenya harkaa qaban waan fixataniif, beelaaf saaxilamuu danda’aniiru jedhan.

Akka namni kun jedhanitti, namoonni hedduun baadiyaa keessa jiraatan, beela sukaneessaa isaan miidhaa jiru jalaa, qe’ee isaanii dhiisanii gara magaalatti deemaa jiru.

Namoota gara magaalatti deemaa jiran keessaa manguddoonni humna dhabeeyyi ta’anis ni jiru.
Erga magaalaa gahanii booda, lubbuu ufii jiraachisuuf jecha, hujii humnaa olii hojjatanii jiraachuudhaaf dirqamanii jiran.

Hujii humnaa kana hojjachuudhaaf kan dirqaman, lubbuu ufii du’a irraa hambisuuf kan jedhan namni kun, beelli bara kana aanaa isaanii muudatee jiru, haalan yaddessaa ta’uu dubbatan.

Namoota beela kanaan miidhamanii asii fi achi deemaa jiran kana, gama mootummaa biyya bulchaa jiruun, haga ammaatti birmannaan taasifameef tokkollee akka hin jirre namni kun dubbatan.

Namoonnii baay’een daa’imman isaanii waan nyaachisan dhabanii rakkataa jiru. Loon ammoo marga dheedan dhabuun du’aaf saaxilamaniiru jedhan.

Rakkoo kanaan dura muldhatee hin beekne kana, mootummaanis gargaaruu dhiisee caldhisee ilaalaa jira kan jedhan namni kun, sababa kanaaf haalli ammaan kana jiru garmalee yaaddessaadha.

Mootummaan humanan taaytaa qabatee jiru, diinaggeen biyyattii dijiitii lamaan guddatee jira jechuun wayta faarsaa jiru kanatti, lammiileen biyyattii hedduun beelaan saaxilamuu isaanii midiyaalee gara garaa gabaasaa jiraachuun ni yaadatama.

Usmaan Ukkumetu gabaase.

https://www.oromiamedia.org/2015/10/jiraattonni-aanaaadaamii-tulluu-gargaarsa-dhabanii-beelaan-miidhamaa-jiru/

https://www.oromiamedia.org/2015/10/omn-oduu-onk-21-2015/

Why is Ethiopia hungry again?

https://oromianeconomist.wordpress.com/2015/10/20/why-is-ethiopia-hungry-again/

The Cause of Ethiopia’s Recurrent Famine Is Not Drought, It Is Authoritarianism

https://oromianeconomist.wordpress.com/2015/08/27/the-cause-of-ethiopias-recurrent-famine-is-not-drought-it-is-authoritarianism/

Drought, food crisis and Famine in Ethiopia 2015: Children and adults are dying of lack of food, water and malnutrition. Animals are perishing of persisting drought. The worst Affected areas are: Eastern and Southern Oromia, Afar, Ogaden and Southern nations.

https://oromianeconomist.wordpress.com/2015/08/14/drought-food-crisis-and-famine-in-ethiopia-2015-children-and-adults-are-dying-of-lack-of-food-water-and-malnutrition-animals-are-perishing-of-persisting-drought-the-worst-affected-areas-are-e/

The tale of two countries (Obama’s/TPLF’s Ethiopia and Real Ethiopia): The Oromo (Children, Women and elders) are dying of genocidal mass killings and politically caused famine, but Obama has been told only rosy stories and shown rosy pictures.

https://oromianeconomist.wordpress.com/2015/08/02/ethiopia-the-oromo-children-women-and-elders-are-dying-of-genocidal-mass-killings-and-politically-caused-famine-but-obama-has-been-told-only-rosy-stories-and-shown-rosy-pictures-africa-oromia/

Rich countries rejected an international plan to let the UN help fight tax evasion July 16, 2015

Posted by OromianEconomist in Africa, Illicit financial outflows from Ethiopia, Uncategorized.
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???????????Illicit financial outflows from Africa Ethiopia makes among top 10

Leaked Bank Loan Record of Land Grabbers in Gambella June 21, 2015

Posted by OromianEconomist in Africa, Africa and debt, African Poor, Colonizing Structure, Corruption, Dictatorship, Illicit financial outflows from Ethiopia, Land and Water Grabs in Oromia, Land Grabs in Africa, Poverty.
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???????????

Leaked Bank Loan Record of Land Grabbers in Gambella

Leaked Bank Loan Record of Land Grabbers in Gambella

(The Gulele Post) – The following document contains names of individuals and companies who borrowed money from a branch of Development Bank of Ethiopia located in Western Ethiopia for the purpose of investment on farm land development. We have redacted some information to protect our sources. The data shows how much money has been borrowed, by whom and where the supported farm land is located. With exception of few cases, most of the land is taken from Gambella. http://www.gulelepost.com/wp-content/uploads/2014/09/Bank-Loan-for-Land-Grab_Ethiopia.pdf

Bank-Loan-for-Land-Grab_Ethiopia

78 % of land grabbers in Gambella are fascist TPLF from Tigray, evidence from Gambella state. Dhiba keessa qabxii 78 saamicha lafaa Gambella irratti kan bobba’ani woyyaanota/ ilmaan Tigreeti. Ragaa motummaa Gambeellaa irraa argame kan armaa gadiitiin mirkaneessa.

land grabbers in Gambellaland grabbers in Gambellalandgrabbers1 in Gambella

https://www.oromiamedia.org/2015/06/omn-oduu-waxabajjii-18-2015/

Africa’s Looting Machine: Warlords, Tycoons, Smugglers and the Systematic Theft of Africa’s Wealth review – ‘the raping of a continent’ June 16, 2015

Posted by OromianEconomist in Africa, Africa and debt, Africa Rising, Illicit financial outflows from Ethiopia.
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O

Abay Tsehaye TPLF fascist mass killer

The Looting Machine: Warlords, Tycoons, Smugglers and the Systematic Theft of Africa’s Wealth review – ‘the raping of a continent’

Ian Birrell,  The Guardian, 2nd March 2015

 Laurent Kabila, the former president of the Democratic Republic of Congo, who received ‘at least $4m a week in cash-filled suitcases from mining companies’. Photograph: Adil Bradlow/AP

Augustin Katumba Mwanke was a young banker in South Africa when persuaded to return home to help rebuild the Democratic Republic of Congo by the new government of Laurent Kabila. A year later he got a call from the president, a fellow Katangan, and was stunned to be appointed governor of an area the size of France, with control over some of the world’s most valuable mineral seams.

This marked the start of his rapid rise to power beside the president, placed at the core of a network of Congolese officials, foreign businessmen and organised criminals plundering the nation’s immense wealth. First, they transferred $5bn of state assets into the pockets of private firms with no benefit to the state, then after this was exposed, Katumba created a shadow state to steal funds, buy elections and bribe supporters. One witness says Kabila was being handed at least $4m a week in cash-filled suitcases from mining companies.

The victims, of course, are those millions condemned by the “resource curse” to conflict and poverty in a country that remains among the world’s poorest, despite the huge riches beneath their feet. As this timely book shows, similar shadow states are pillaging Africa’s immense wealth, from Angola to Zimbabwe, while corroding its societies. The result is a nation such as Nigeria, one of the world’s major oil producers, generating half as much electricity as North Korea – only enough to power one toaster for every 44 of its citizens.

After nine years reporting on Africa for the Financial Times, Tom Burgis exposes how the extractive industries have turned into a hideous looting machine, the west guilty of complicity in the raping of a continent. As he says, corruption does not end at the borders; kleptocratic regimes use avaricious allies to sell their commodities and stash illicit cash. “Its proponents include some of the world’s biggest companies, among them blue-chip multinationals in which, if you live in the west and have a pension, your money is almost certainly invested.”

Burgis shows how even the World Bank is linked to this looting, although it would have been good to see recognition of the role of aid propping up awful regimes. But the author makes an important case colourfully, convincingly and at times courageously as he confronts some of those involved in the pillaging. He examines countries cursed in similar style, whether by oil in Angola, coltan in the Congo, iron ore in Guinea, uranium in Niger or diamonds in Zimbabwe. There are lots of dodged questions and unanswered emails, but also surprising admissions, such as the Nigerian governor defending his need to “settle” payments for political survival. “If I don’t, I’ve got a big political enemy,” he says.

South Africa is home to the world’s most valuable mineral resources – yet the gap between rich and poor probably widened since the end of apartheid. This fits a pattern of inequality stemming from the resource curse, argues Burgis, pointing out how some leaders fought against racist regimes only to preside over elites that resemble in structure minority rulers they overthrew. “It’s like a virus, transmitted from the colonial regime to the post-independence rulers,” says one Nigerian critic. “And these extractors, they are the opposite of a society that is governed for the public good.”

Then there is the questionable role of China. The author is right to say there is a “distinct whiff of hypocrisy” to western criticism of the nation’s advance into Africa. Yet he grapples with the role played by the secretive Sam Pa. Burgis speculates about links to Chinese intelligence as he details Pa’s steady, lucrative cultivation of top-level contacts. His informative book ends with the words of Nigeria’s impassioned singer Nneka: “Don’t think you’re not involved.”

The Looting Machine is published by Harper Collins. Click here to buy it for £16

http://www.theguardian.com/books/2015/mar/02/looting-machine-warlords-tycoons-smugglers-systematic-theft-africa-wealth-review?utm_content=buffer0a30b&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer

The Plunder of Africa

How Everybody Holds the Continent Back

Discussions about the fate of Africa have long had a cyclical quality. That is especially the case when it comes to the question of how to explain the region’s persistent underdevelopment. At times, the dominant view has stressed the importance of centuries of exploitation by outsiders, from the distant past all the way to the present. Scholars such as the economist William Easterly, for example, have argued that even now, the effects of the African slave trade can be measured on the continent, with areas that experienced intensive slaving still showing greater instability, a lack of social trust, and lower growth. Others observers have focused on different external factors, such as the support that powerful countries offered corrupt African dictatorships during the Cold War and the structural-adjustment policies imposed by Western-led institutions in the 1980s—which, some argue, favored disinvestment in national education, health care, and other vital services.

At other times, a consensus has formed around arguments that pin the blame on poor African leadership in the decades since most of the continent achieved independence in the 1960s. According to this view, the outside world has been generous to Africa, providing substantial aid in recent decades, leaving no excuse for the continent’s debility. There’s little wrong with African countries that an end to the corruption and thievery of their leaders wouldn’t fix, voices from this camp say. Western media coverage of Africa has tended to provide fodder for that argument, highlighting the shortcomings and excesses of the region’s leaders while saying little about the influence of powerful international institutions and corporations. It’s easy to understand why: Africa’s supply of incompetent or colorful villains has been so plentiful over the years, and reading about them is perversely comforting for many Westerners who, like audiences everywhere, would rather not dwell on their own complicity in the world’s problems.

Reading about African villains is perversely comforting for many Westerners who, like audiences everywhere, would rather not dwell on their own complicity in the world’s problems.

One of the many strengths of Tom Burgis’ The Looting Machine is the way it avoids falling firmly into either camp in this long-running debate. Burgis, who writes about Africa for theFinancial Times, brings the tools of an investigative reporter and the sensibility of a foreign correspondent to his story, narrating scenes of graft in the swamps of Nigeria’s oil-producing coastal delta region and in the lush mining country of the eastern Democratic Republic of the Congo, while also sniffing out corruption in the lobbies of Hong Kong skyscrapers, where shell corporations engineer murky deals that earn huge sums of money for a host of shady international players. Although Burgis’ emphasis is ultimately on Africa’s exploitation by outsiders, he never loses sight of local culprits.

GIMME THE LOOT

Sure signs that Burgis is no knee-jerk apologist for African elites arrive early in the book, beginning with his fascinating and lengthy account of “the Futungo,” a shadowy clique of Angolan insiders who he claims control their country’s immense oil wealth, personally profiting from it and also using it to keep a repressive ruling regime in power. The country’s leader, José Eduardo dos Santos, has been president since 1979, and in 2013, Forbes magazine identified his daughter, Isabel, as Africa’s first female billionaire. “When the International Monetary Fund [IMF] examined Angola’s national accounts in 2011,” Burgis writes, it found that between 2007 and 2010, “$32 billion had gone missing, a sum greater than the gross domestic product of each of forty-three African countries and equivalent to one in every four dollars that the Angolan economy generates annually.” Meanwhile, according to Burgis, even though the country is at peace, in 2013 the Angolan government spent 18 percent of its budget on the Futungo-dominated military and police forces that prop up dos Santos’ rule—almost 40 percent more than it spends on health and education combined.

Those who tend to blame Africa’s woes on elite thievery seize on such examples with relish. But Burgis tells a much fuller story. Angola’s leaders may seem more clever and perhaps possess more agency than other African regimes—and indeed, other African states seem to be eagerly adopting the Angolan model. But the regime relies on the complicity of a number of actors in the international system—and the willful ignorance of many others—to facilitate the dispossession of the Angolan people: Western governments, which remain largely mute about governance in Angola; major banks; big oil companies; weapons dealers; and even the IMF. They provide the political cover, the capital, and the technology necessary to extract oil from the country’s rich offshore wells and have facilitated the concealment (and overseas investment) of enormous sums of money on behalf of a small cabal of Angolans and their foreign enablers. Because Angola’s primary resource, oil, is deemed so important to the global economy, and because its production is so lucrative for others, Angola is rarely pressed to account for how it uses its profits, much less over questions of democracy or human rights. Burgis shows how even the IMF, after uncovering the $32 billion theft, docilely reverted to its role as a facilitator of the regime’s dubious economic programs.

Angolan President Jose Eduardo dos Santos leaves a meeting at the Elysee Palace in Paris, France, April 2014.

For those who insist that foreign aid to Africa compensates for the role that rich countries, big businesses, and international organizations play in plundering the continent’s resource wealth, Burgis has a ready rejoinder. “In 2010,” he writes, “fuel and mineral exports from Africa were worth $333 billion, more than seven times the value of the aid that went in the opposite direction.” And African countries generally receive only a small fraction of the value that their extractive industries produce, at least relative to the sums that states in other parts of the world earn from their resources. As Burgis reveals, that is because multilateral financial institutions, led by the World Bank and its International Finance Corporation (IFC), often put intense pressure on African countries to accept tiny royalties on the sales of their natural resources, warning them that otherwise, they will be labeled as “resource nationalists” and shunned by foreign investors. “The result,” Burgis writes, “is like an inverted auction, in which poor countries compete to sell the family silver at the lowest price.”

Meanwhile, oil, gas, and mining giants employ crafty tax-avoidance strategies, severely understating the value of their assets in African countries and assigning the bulk of their income to subsidiaries in tax havens such as Bermuda, the Cayman Islands, and the Marshall Islands. Some Western governments tolerate and even defend such arrangements, which increase the profits of Western companies and major multinational firms. But these tax dodges further shrink the proceeds that African states earn from their resources. According to Burgis, in Zambia, one of the world’s top copper producers, major mining companies pay lower tax rates than the country’s poor miners themselves. Partly as a result, he reports, in 2011, “only 2.4 percent of the $10 billion of revenues from exports of Zambian copper accrued to the government.” Ghana, a major gold producer, fared slightly better, with foreign mining companies paying seven percent of the revenue they earned in taxes—still a tiny amount, Burgis points out, “compared with the 45 to 65 percent that the IMF estimates to be the global average effective tax rate in mining.”

A RACE TO THE BOTTOM

African countries’ unequal relationships with powerful international financial organizations and large multinational firms help explain the “resource curse” so frequently lamented in discussions of the continent’s economies. Rather than issuing from some mysterious invisible force, the curse is to a large degree the product of greed and the disparities in leverage between rich and poor—and its effects are undeniable. Burgis quotes a 2004 internal IFC review that found that between 1960 and 2000, “poor countries that were rich in natural resources grew two to three times more slowly than those that were not.” Without exception, the IFC found, “every country that borrowed from the World Bank did worse the more it depended on extractive industries.”

A case in point is the arid, Sahelian country of Niger, which for decades has served as a major supplier of uranium to France, its former colonial master. According to Burgis, the French company Areva pays tiny royalties for Niger’s uranium—an estimated 5.5 percent of its market value. And the details of the company’s contracts with Niger’s government are not publicly disclosed. Reflecting on this situation during an interview with Burgis, China’s ambassador to Niger adopts a posture of moral outrage, proclaiming that Niger’s “direct receipts from uranium are more or less equivalent to those from the export of onions.”

Rather than issuing from some mysterious invisible force, the “resource curse” is to a large degree the product of greed and the disparities in leverage between rich and poor.

This is a telling exchange, since many Africans believed that Chinese investment and influence on the continent would offer a way to lift the resource curse. Many greeted the arrival of the Chinese as big economic players in the region, which began in the mid-1990s, with great enthusiasm—especially the leaders of states whose economies depend heavily on minerals. China’s share of the global consumption of refined metals rose from five percent in the early 1990s to 45 percent in 2010; its oil consumption increased fivefold during the same period. In 2002, Chinese trade with Africa was worth $13 billion; a mere decade later, that figure had soared to $180 billion, three times the value of U.S. trade with 
the continent.

The hope was that with China directly competing with Africa’s economic partners in the West, African countries would win better terms for themselves. But as Burgis makes painfully clear, what has happened more often is a race to the bottom, in which Chinese firms focus their attention on African countries that face sharp credit restrictions or economic boycotts from the West, owing to coups d’état or human rights abuses. In many such countries, including Angola, the Democratic Republic of the Congo, and Guinea, the Chinese have extended easy financing to governments, crafting secretive deals that reward Chinese investors with even more lopsided terms than Western governments and firms tend to enjoy. “Access to easy Chinese loans might have looked like a chance for African governments to reassert sovereignty after decades of hectoring by the [World] Bank, the IMF, and Western donors,” Burgis writes, but, “like a credit card issued with no credit check, it also removed a source of pressure for sensible economic management.” In addition to this, critics point out that Chinese companies frequently bring in their own workers from China, providing little employment for Africans and few opportunities for Africans to master new skills and technologies.

 

Some of Burgis’ strongest work follows the dealmaking of a shadowy Hong Kong–based outfit called the 88 Queensway Group, which was founded by a man sometimes known as Sam Pa, whose background is reportedly in Chinese intelligence. By tracing a complex web of corporate relations, Burgis shows how Pa’s group has put together lucrative deals in one African country after another, since starting seemingly from scratch in Angola during the early phases of China’s push into Africa.

In Burgis’ telling, one mission of Pa’s 88 Queensway Group and its associated companies, including China Sonangol and the China International Fund, seems to be offering the Chinese government plausible deniability when it comes to major transactions and contracts with some of Africa’s most corrupt and violent regimes. But some African elites at the receiving end of Pa’s entreaties have been left with little doubt that dealing with Queensway would in fact put them in contact with the highest levels of the Chinese state. Mahmoud Thiam served as the minister of mines in Guinea under President Moussa Dadis Camara, a junta leader who faced international outrage after his forces opened fire on a peaceful opposition rally in September 2009, killing at least 150 and gang-raping many who tried to flee the assault. In 2009, Thiam traveled to China at Queensway’s invitation and later told Burgis about being whisked around Beijing by Pa’s associates. “If they were not a government entity, they definitely had strong backing and strong ties,” Thiam recalled. “The level of clearances they had to do things that are difficult in China, the facility they had in getting people to see us [and] the military motorcade gave us the impression that they were strongly connected.” In the case of Guinea and other places, Burgis reports that Queens­way was able to provide tens of millions of dollars to African governments on short notice, with virtually no strings attached, sometimes to help bail out leaders presiding over economic crises and sometimes merely to prove the company’s bona fides.

The hope was that with China directly competing with Africa’s economic partners in the West, African countries would win better terms for themselves. But what has happened more often is a race to the bottom.

In the hands of a less astute observer, Pa could come off as something like a Bond villain. But Burgis rightly reminds readers that it hardly takes a conniving mastermind to profit off the inequities and shortcomings of African political systems. “If it weren’t him, it would be someone else,” as a U.S. congressional researcher puts it to Burgis. The researcher adds that even if Pa’s operation were shut down, “the system is still there: these investors can still form a company without saying who they are, they can still anchor their business in a country that is not concerned about investors’ behavior overseas, and, sadly, there’s no shortage of resource-rich fragile states on which these investors can prey.”

LOSS PREVENTION

By showing how “the looting machine” is operated by people and institutions both inside and outside Africa, Burgis transcends the tired binary debate about the root causes of the continent’s misery. But if the problem is as complex as he makes it out to be, with avarice flowing from so many different sources, how can ordinary Africans—and African elites intent on leading more just, prosperous, and equitable societies—improve 
their prospects?

For Africans, the answer lies in large part in insisting on more open and accountable government. Although the outside world has taken little notice, democracy has spread significantly around the continent in the last two decades, and although conflicts grab the headlines, evidence suggests that war and other forms of large-scale violence have declined during this same period. Stronger civil societies and regular, free, and fair elections would prevent leaders such as Angola’s dos Santos from perpetuating their rule for decades and might allow more responsive elites to put Africa’s resources in the service of more equitable development strategies.

For the outside world, the priority should be getting foreign powers, including China, to agree on more stringent measures to combat corrupt business practices. The U.S. Treasury Department is cracking down on foreign banks that enable Americans to evade taxes; Washington should expand its efforts to prevent illicit financial flows involving other countries as well, reducing the amount of revenue that African countries lose owing to tax havens.

Finally, as Burgis’ book strongly implies (although does not explicitly argue), international financial institutions such as the World Bank and the IMF must be made much more accountable. In Africa, that would mean publicly measuring their programs’ performance in terms of their impact on economic growth. Over the years, such institutions have demanded rigorous compliance from their poorest clients while never holding their own performance or the soundness of their advice up to public scrutiny. The internal IFC review Burgis cites made the same point more than a decade ago. But its findings were largely ignored as the World Bank continued to promote extractive industries in Africa even when they contributed nothing to development. Today, with Africans seeking to cross the Mediterranean Sea by the thousands to escape misery, a simple recommendation from that review is perhaps more pertinent than ever: World Bank and IFC staff should be rewarded not simply for allocating money to projects but for demonstrably reducing poverty. After all, whatever the causes of African poverty, any efforts to address it will fail if they are blind to their own effects.

https://www.foreignaffairs.com/reviews/review-essay/2015-06-16/plunder-africa

Africa, resource curse and weakest institutions: International mining companies contrive with local African elites to strip the continent of its resources. April 13, 2015

Posted by OromianEconomist in Africa, Africa Rising, Illicit financial outflows from Ethiopia, Land Grabs in Africa, Land Grabs in Oromia.
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OA shocking investigative journey into the way the resource trade wreaks havoc on Africa, ‘The Looting Machine’ explores the dark underbelly of the global economy.

The Looting Machine

AFRICANS ask many questions about what ails a continent that abounds with natural riches yet suffers, too, from greedy rulers, bad government and entrenched poverty. The replies they get range from the outright racist to the climatic (countries in the tropics suffer from more parasites and disease than in more temperate latitudes) to the political, with many blaming colonialism or so-called neo-colonialism for the continent’s woes.

For Tom Burgis, a journalist with the Financial Times, the problem is, paradoxically, Africa’s wealth of natural resources. He is not the first to write about countries with the “resource curse”. Nor does his book add to the copious academic literature on the subject. But Mr Burgis sees Africa—with a third of the Earth’s mineral deposits and some of its weakest institutions—as being particularly vulnerable to the predations that arise from the combination of mineral wealth and poor governance.

“The Looting Machine” is the fruit of Mr Burgis’s many travels through Africa, from bars in Port Harcourt to gleaming new office towers in Luanda, as well as his work as an investigative journalist. He presents a lively portrait of the rapacious “looting machine” in which international mining companies contrive with local African elites to strip the continent of its resources. In doing so he is not short of anecdotes (nor copious footnotes). In Angola he points to a small group that controls the state and has amassed great wealth. In parts of Nigeria these resource rents are shared between an elite that controls the state and armed warlords who held it to ransom through blowing up pipelines and kidnapping oil workers.

“In the place of the old empires are hidden networks of multinationals, middlemen and African potentates,” Mr Burgis says. “These networks fuse state and corporate power. They are aligned to no nation and belong instead to the transnational elites that have flourished in the era of globalisation.”

Yet for all the rhetorical flourish, Mr Burgis fails to explain why some states with bountiful natural resources manage them in ways that deepen democratic institutions and benefit the poor. One need not look as far as Norway for this. Botswana gets a mention for its economic dependence on diamonds (it is a major producer), but less so for its democratic traditions, excellent health and education systems and stability.

“The Looting Machine” reads partly like a mystery thriller and partly like a court submission, with its detailed descriptions of the corporate connections between Chinese companies with interests across the continent. Mr Burgis offers a rich collage of examples showing the links between corrupt companies and African elites. But he fails to argue convincingly that natural resources are the primary, or even a major, source of Africa’s troubles.  http://www.economist.com/news/books-and-arts/21647954-huge-natural-resources-and-poor-governance-are-dreadful-combination-blood-earth?fsrc=scn/tw/te/pe/ed/LootingMachine

THE DEPTHS OF ETHIOPIA’S CORRUPTION. #Africa March 11, 2015

Posted by OromianEconomist in Colonizing Structure, Corruption, Corruption in Africa, Illicit financial outflows from Ethiopia.
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According to the World Bank, companies held by business group the Endowment Fund for the Rehabilitation of Tigray (EFFORT) account for roughly half of the country’s modern economy. The group is closely allied with the ruling Ethiopian People’s Revolutionary Democratic Front (EPDRF), an alliance of four parties.

EFFORT is a conglomerate formed from assets collected in 1991 by the EPRDF to rehabilitate the Tigray region in northern Ethiopia after it had been decimated by poverty and conflict. The Tigray People’s Liberation Front (TPLF) is the lead party in the EPDRF coalition.

Tigrayans, however, only account for eight percent of the country’s 90 million people. According to Abebe Gellaw, an exiled Ethiopian journalist and founder of Addis Voice, a web platform that provides news that is otherwise censored by the Ethiopian government, EFFORT has become a business racket for the Tigrayan elite who are monopolising major sources of the country’s wealth.

“The TPLF controls key government institutions and a significant portion of the economy. For over 15 years, EFFORT has been used by the TPLF to channel public resources and funds to the coffers of the TPLF through illegal deals, contracts, tax evasion, kick-backs and all sorts of illegal operations,” he told IPS.

Azeb Mesfin, Zenawi’s widow, currently manages the multi-billion-dollar business empire.

She claims her husband paid himself a modest salary of 250 dollars a month, yet the online website “the Richest.org”, which publishes the net worth of the richest people in the world, recently divulged that Meles was in fact one of Africa’s wealthiest leaders having amassed a personal fortune of three billion dollars.

http://www.africacradle.com/2015/03/11/the-depths-of-ethiopias-corruption/

The TPLF Corruption network

THE DEPTHS OF ETHIOPIA’S CORRUPTION

(Africa cradle, Finfinnee/London) – Ethiopia may be one of the fastest-growing, non-oil producing economies in Africa in recent years, but corruption in this Horn of Africa nation is a deterrent to foreign investors looking for stable long-term partnerships in developing countries.

“Bankers, miners and developers presenting projects to investment committees in countries that fare badly in corruption rankings frequently struggle to get investment. Corruption raises red flags because it makes local markets uncompetitive, unpredictable and therefore largely hostile to these long-term players,” Ed Hobey, the East Africa analyst at the political risk firm Africa Risk Consulting, told us.

On May 11, in the biggest crackdown on corruption in Ethiopia in the last 10 years, authorities arrested more than 50 high profile people including government officials, businessmen and a minister.

Melaku Fanta, the director general of the Revenue and Customs Authority, which is the equivalent rank of a minister, his deputy, Gebrewahid Woldegiorgis, and other officials were apprehended on suspicion of tax evasion.

But the arrests have raised questions about the endemic corruption at the heart of the country’s political elite.

Berhanu Assefa of the Federal Ethics and Anti-corruption Commission of Ethiopia told us that these arrests highlighted how corruption has insinuated itself into the higher levels of officialdom.

“Corruption is a serious problem we are facing. We now see that corruption is occurring in higher places than we had previously expected. Areas vulnerable to corruption are land administration, tax and revenue, the justice system, telecommunications, land procurement, licensing areas and the finance sector,” he said.

Ethiopia ranks 113 out of 176 countries on the Corruption Perceptions Index of Transparency International, a global civil society coalition that encourages accountability. The country has also lost close to 12 billion dollars since 2000 to illicit financial outflows, according to Global Financial Integrity (GFI), whose statistics are based on official data provided by the Ethiopian government, the World Bank, and the International Monetary Fund (IMF).

Dr. Getachew Begashaw, a professor of economics at Harper College in the United States, told IPS that there was a fear that the recent high profile arrests were merely political theatre designed to placate major donors such as the World Bank and the IMF, and to give credibility to the new regime’s fight against corruption. Prime Minister Hailemariam Desalegn took over leadership of the country after Prime Minister Meles Zenawi died in August 2012.

“They are using this as a PR stunt to appease not only the donors, but to also dupe the Ethiopian people. Because many non-party affiliated Ethiopians in the business community are complaining, and this complaint is trickling down to the average people on the streets,” he told IPS.

According to the World Bank, companies held by business group the Endowment Fund for the Rehabilitation of Tigray (EFFORT) account for roughly half of the country’s modern economy. The group is closely allied with the ruling Ethiopian People’s Revolutionary Democratic Front (EPDRF), an alliance of four parties.

EFFORT is a conglomerate formed from assets collected in 1991 by the EPRDF to rehabilitate the Tigray region in northern Ethiopia after it had been decimated by poverty and conflict. The Tigray People’s Liberation Front (TPLF) is the lead party in the EPDRF coalition.

Tigrayans, however, only account for eight percent of the country’s 90 million people. According to Abebe Gellaw, an exiled Ethiopian journalist and founder of Addis Voice, a web platform that provides news that is otherwise censored by the Ethiopian government, EFFORT has become a business racket for the Tigrayan elite who are monopolising major sources of the country’s wealth.

“The TPLF controls key government institutions and a significant portion of the economy. For over 15 years, EFFORT has been used by the TPLF to channel public resources and funds to the coffers of the TPLF through illegal deals, contracts, tax evasion, kick-backs and all sorts of illegal operations,” he told IPS.

Azeb Mesfin, Zenawi’s widow, currently manages the multi-billion-dollar business empire.

She claims her husband paid himself a modest salary of 250 dollars a month, yet the online website “the Richest.org”, which publishes the net worth of the richest people in the world, recently divulged that Meles was in fact one of Africa’s wealthiest leaders having amassed a personal fortune of three billion dollars. This has led many to question the provenance of the erstwhile leader’s wealth – when he had no known business engagements.

Illicit financial flows as a result of corruption are a major hindrance to a country’s development, undermining institutions, economies and societies. According to the Africa Progress Panel’s Africa Progress Report 2013, the continent is losing more through illicit financial outflows than it receives in aid and foreign direct investment.

A commitment to greater accountability and transparency to curtail illicit financial flows should occur on both the national and international levels, according to E. J. Fagan, deputy communications director at GFI.

“Reforms and policies are needed to strengthen customs enforcement and make governing apparatuses more transparent. The international community can create a multilateral system of automatic exchange of tax information that African countries like Ethiopia can access, so as to make it difficult for illicit actors to hide money and transfer large amounts of illicit money without detection,” he told IPS.

Begashaw added that corruption in the social sphere also breeds social inequality, disenfranchisement and a breakdown in national unity and civil society.

“The very existence of parastatals and TPLF-affiliated endowed business conglomerates like EFFORT is a major source of corruption. The Birr (Ethiopian currency) will depreciate and inflation will skyrocket. The capacity of the state to provide public goods and services will decline. Free market competition will be eroded. Government revenue will be reduced and the budget deficit will rise.

“If they are really serious about combating corruption, they should start doing so from the top,” he said.

Ethiopia is among the top 10 African countries in terms of being a source of illicit financial flows (IFFs), most of which makes ways to the developed world. #Africa February 10, 2015

Posted by OromianEconomist in Africa, Africa and debt, Illicit financial outflows from Ethiopia.
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 OIllicit financial outflows from Africa Ethiopia makes among top 10

 With Nigeria leading the pack of top loser counties in Africa, Ethiopia alone lost a cumulative of USD 16.5 billion between 1970 and 2008. But, since 2010, Ethiopia more likely lost USD 10 billion which could have shortened significantly the 13 years journey that the country have taken to achieve MDG4 (reduce child mortality by two thirds ) to nine years. In addition to that, the panel found out that failing to curtail illicit financial flows cost the country some six percent of its GDP annually.

Ethiopia: Panel Names One of Ethiopia Top Sources for Illicit Financial Flow

By Berhanu Fekade,  All Africa

 

A high level panel delegated by the African Union (AU) and chaired by Thabo Mbeki, the former president of South Africa, has found Ethiopia to be among the top African nations in terms of being a source of illicit financial flows (IFFs), most of which makes ways to the developed world.

The panel was tasked to find out how prone Africa is for a systematic financial theft which mostly is orchestrated by giant multinational companies operating in the continent. The panel’s report dubbed “track it, stop it and get it” found that in five decades alone, the continent is estimated to have lost one trillion dollars; and currently nations including Ethiopia are losing some 60 billion dollars due to illicit financial flows across the board. With Nigeria leading the pack of top loser counties in Africa, Ethiopia alone lost a cumulative of USD 16.5 billion between 1970 and 2008. But, since 2010, Ethiopia more likely lost USD 10 billion which could have shortened significantly the 13 years journey that the country have taken to achieve MDG4 (reduce child mortality by two thirds ) to nine years. In addition to that, the panel found out that failing to curtail illicit financial flows cost the country some six percent of its GDP annually.

This figure puts the country among the top ten losers; rather creditors via illicit financial flows. Next to Nigeria, countries like Egypt, South Africa, Morocco, Angola, Algeria, Cote d’Ivorie, Sudan, Ethiopia and the Democratic Republic of Congo are the top ten countries which are still losing out billions of dollars in form of “illegally earned, transferred or used” money as it (illicit financial flow) is defined by the panel. Names of the top illicit finance receiving nations include the US, China, India, Spain, France, Japan, Germany, South Korea, Mexico, and the like.

During the summit of heads of state and government which was concluded late last week, the panel appeared before the leaders to present its report on the findings of the three-year-long study that the panel has conducted. In its 15 main findings, the report made it loud and clear that the amount of money leaving Africa via IFFs is muscling up over the years. In 2010, the sums of dollars that flew out of the continent are estimated to be 60 billion dollars. Hence, the report went on to indicate that time has come to prompt the continent to the fact that illicit financial flows are political issues. According to Mbeki, the leaders have decided to adopt the report during the 24th ordinary summit.

The report basically made three classifications regarding the way illicit finances are flowing: via commercial activities, falsification of prices (trade mispricing), quantities and qualities of traded goods. Transfer pricing, profit shifting, tax evasion and the tax incentives which lack cost benefit analysis are some of the systemic commercial thefts the high level panel reported upon. Arms and drugs smuggling, human trafficking, poaching, oil and mineral theft are the criminal activities facilitated by illicit financial flows, the panel argued. Corruption and nontransparent deals are also the impeding factors to curtail the flight of finance from Africa. However, some studies allude to the fact that it is corruption which is extremely bleeding the continent really bad. These studies indicate that, up to 150 billion dollars annually is lost due to corrupt systems along the board in the continent.

To make matters worse, the continent faces huge gaps to finance infrastructural requirements as well as human development issues. The illicit flights alone largely exceed the official development assistants many African nations receive, Mbeki noted.

 

Read More at:

http://allafrica.com/stories/201502090215.html

Aid to #Africa: Millions of pounds of aid money is at risk of falling into criminal hands, warn MPs January 30, 2015

Posted by OromianEconomist in Africa, Africa and debt, Aid to Africa, Corruption in Africa, Illicit financial outflows from Ethiopia, UK Aid Should Respect Rights.
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 Odaily telegraph

Millions of pounds of aid money is at risk of falling into criminal hands, warn MPs

Department for International Development’s oversight of foreign aid group was ‘unacceptably poor’, warn MPs

Holly Watt,  The Telegraph

http://www.telegraph.co.uk/news/worldnews/africaandindianocean/11375222/Millions-of-pounds-of-aid-money-is-at-risk-of-falling-into-criminal-hands-warn-MPs.html

Companies allegedly linked to African criminals, fraudsters and money launderers have been given tens of millions of pounds of taxpayers’ money, a report has found, as the full scale of the UK’s foreign aid folly emerged.

A further £27m was left in a bank account which had an interest rate of 0.016 per cent a year, according to the Public Accounts Committee.

The Private Infrastructure Development Group, an aid group set up by the Department for International Development which invests in projects in developing countries, also spent thousands of pounds on business class flights.

The report will raise further questions about the Government’s overseas aid budget, which has grown in recent years as ministers try to meet a commitment in the Coalition agreement to spend 0.7 per cent of the GDP on developing countries from 2013.

The UK government will have given PIDG £700million over the three years leading up to this March, meaning Britain has given around 70 per cent of the group’s income since it was set up.

However the report by the influential committee of MPs criticised the department’s management of the agency, saying DFID’s oversight of the group has been “unacceptably poor”.

In one case, PIDG’s Emerging Africa Infrastructure Fund invested almost £20million in a project designed to support the gas processing and distribution activities of Seven Energy, a Nigerian energy company.

“Seven Energy was named by the former Governor of the Central Bank of Nigeria in a 2014 investigation he conducted into the allegations of looting of Nigerian oil revenues,” noted the MPs.

PIDG’s Emerging Africa Infrastructure Fund also put almost £19 million into a power plant in the Ivory Coast, where a fellow investor was allegedly a notorious fraudster called James Ibori.

Ibori was jailed in 2012 for 13 years after admitting fraud of nearly £50million. The judge in his case said that the £50million figure could be “ludicrously low”, and that the amount pocketed by the former governor of Nigeria’s Delta state was “unquantified”.

Margaret Hodge, the chair of the Committee of Public Accounts, said that DFID’s oversight of the group had left it open to questions about the integrity of PIDG’s investments and some of the companies it partnered.

“Concerns were raised with us about the complex corporate structures that PIDG’s partners have sometimes established, making it difficult to be certain about the ownership of companies and creating a risk that those involved may have criminal connections,” she said.

PIDG operates around the world, in countries including Ivory Coast, the Democratic of Congo and Sierra Leone. Mrs Hodge said MPs accepted that these countries could be “challenging”, but that PIDG needed “much tougher scrutiny” from the department, which is headed by Justine Greening.

PIDG also left an average of £27million in a bank account for almost two years – earning interest of 0.016 per cent a year. The MPS said that the loss was likely to have been between £200,000 and £2million and said that the bank in question, SG Hambros, was likely to have made a financial return from the “idle” funds.

“We questioned how it had been possible for the Department, PIDG, and [SG Hambros] not to have been aware of this matter for 18 months,” stated the report.

DFID has been ordered to write to SG Hambros and demand a donation to charity working against Ebola in west Africa in return for the lost interest.

The foreign-aid quango also continued to allow staff to book fully flexible business class flights for two years after DFID ordered the group to “tighten up” its travel policy.

The National Audit Office found that between January 2011 and July 2014, PIDG employees booked 15 flights which cost more than £5,000 each, at a total cost in excess of £75,000.

“It is essential for public confidence in spending on overseas aid that the Department for International Development is able to demonstrate that UK taxpayers’ money is being used for its intended purpose – of helping the world’s poorest people – and not ending up in the wrong hands,” said Mrs Hodge.

“Every pound that is lost to fraud and corruption is a pound that could have been spent on educating a child, improving health systems or supporting economic development.”

Mary Creagh MP, Labour’s Shadow Development Secretary, attacked the government’s management of the agency.

“David Cameron promised value for money on aid but this report shows he has failed to deliver. The NAO and now the Public Accounts Committee have exposed that the Tory-led Government has been pouring hundreds of millions of pounds of taxpayers’ money into projects without checking where it went,” said Ms Creagh.

“Ministers have sat on their hands while Britain’s aid efforts have been undermined. If the Tories and Lib Dems don’t know where aid money is going then how can they measure if it is working?”

A DFID spokesman denied that PIDG had links to known criminals.

He said: “Britain’s investment in the Private Infrastructure Development Group (PIDG) has helped to create 200,000 jobs and driven £6.8billion of private investment into some of the world’s poorest countries, developing their economies and making them less dependent on aid.

“This PAC report suggests that UK funds are at risk of ending up in the wrong hands, citing alleged links between a convicted fraudster and a PIDG-backed company.

“These have been investigated thoroughly by the National Audit Office, as well as DFID and PIDG, and absolutely no evidence has been found to substantiate them.

“We already have strong oversight of PIDG’s activities and have recently clamped down on excessive travel rates. An independent review of their operations, backed by Britain, will ensure they continue to kick start growth in the developing world.”

DFID spending has attracted criticism over the years. Last year, the Independent Commission for Aid Impact so found that some British aid money was funding corruption abroad.

One development project in Nepal encouraged people to forge documents to gain grants while police stations in Nigeria linked to British aid were increasingly demanding bribes, the report discovered.

It also emerged that civil servants went on a £1billion spending spree in just eight weeks to hit the 0.7 per cent spending target.

http://www.telegraph.co.uk/news/worldnews/africaandindianocean/11375222/Millions-of-pounds-of-aid-money-is-at-risk-of-falling-into-criminal-hands-warn-MPs.html

Africa: resource curse or leadership curse? January 17, 2015

Posted by OromianEconomist in Africa, Africa Rising, Corruption in Africa, Dictatorship, Illicit financial outflows from Ethiopia, Leadership curse.
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???????????what is wealth

The main challenge for Africa is to reinvent how it grows, in a way that creates opportunities for all. The opportunity to go to a good hospital; the opportunity to attend a competent school and develop technical and intellectual skills; the opportunity of not being discriminated against based on gender; or simply the opportunity to produce a couple more litres of milk and become an abundant farmer instead of a subsistence farmer. The key is having the possibility of living like Malik wanted to, by trading and sharing his goats and vegetables, or choosing a more “westernized” lifestyle.

In order to shape this new kind of growth and reverse this leadership curse, it is fundamental to reinvent leadership itself.

Africa’s “eternal” incumbent leaders – such as Equatorial Guinea’s president, Obiang; his Uganda congener, Museveni; or Cameroon’s head, Biya – have not steered the wheel in the direction of generalised prosperity. They have instead narrowed the chances for anyone else to achieve it.

Africa needs leaders from different disciplines, places and generations, who are capable of challenging the status quo and framing a new development phase. And the importance of involving both policy and business is large. The curse can only be lifted if government, civil society and business leaders collaborate to craft long-term strategies for their countries and people.

In a nutshell, there is a need to develop African leaders who are capable of acting differently. Leaders who not only have a broad understanding of the contextual world but also have an in-depth knowledge and respect for local behaviour. Leaders who are capable of composing a better future by going beyond the golden GDP growth quest or revenues pursuit; and who instead value their ecosystems as a whole: their existing human and natural resources. Leaders who Malik would be proud to go home to.

The big question remains: is Africa ready to overcome these barriers?

http://www.theguardian.com/sustainable-business/xynteo-partner-zone/2015/jan/16/africa-resource-curse-or-leadership-curse?CMP=share_btn_fb

Africa: resource curse or leadership curse?

Xyntéo analyst Joao Sousa blogs on an encounter that made him reflect on what the golden GDP quest means for the people of Africa

Joao Sousa, The Guardian

A few weeks ago, on one of my regularly-occurring train rides to Oslo airport, I sat next to someone who would make me rethink the way I perceive the world. This man was a 40-something Somalian who had been living in Oslo for longer than he wanted. I greeted him and he greeted me back, telling me his name was Malik and that he was from Jilib, in Somalia.

I have always been curious about life in Somalia, and wondered whether the Somali novelist Nuruddin Farah’s books convey the media-blurred reality of the place.

So I asked him what it was like in Somalia. “Very good,” he said, “in Somalia we would be very rich if it were not for the war.”

I wondered what he could be talking about, considering Somalia isn’t known for riches and resources. He then showed up humans’ differing perceptions of “wealth” by saying, “We have lots of goats and we even grow our own vegetables.” Wealth, to Malik, is evidently very different from wealth according to the average westerner.

Knowing the situation in Somalia is now more stable, I asked him whether he had any plans to go back, and he told me, with watering eyes, that one of his remaining dreams is to return home and live from what he can get from the land, with his community.

The same week that I met Malik, newspapers all over the world were full of stories about Nigeria’s “miraculous” GDP recalculation, which saw its numbers double overnight despite “missing billions”. The ordinary Nigerian person, however, stood exactly in the same place as they were the day before.

Nigeria and Somalia are very different sub-Saharan countries. The first, one could say, suffers from the resource curse; the second simply suffers. Nigeria is the largest African oil producer; Somalia has one of the lowest GDP per capita (PPP) in the world, 90 times lower than in Norway.

But in spite of the differences the two countries have many similarities (and, no, I don’t mean Boko Haram and Al Shabaab). Both are highly exposed to climate change, which degrades their land and causes food and water scarcity. Both have dysfunctional educational systems, malfunctioning political arrangements, hindered rules of law, and flawed wealth distribution. (Jim Yong Kim, the World Bank president, was right when he connected all these issues in one sentence: “We will never end poverty if we don’t tackle climate change.”) And both have an enormous untapped natural and human potential that can only be met if their future leaders are visionary and transformative.

Spin the globe, close your eyes and try to point to Africa. The probability is that your finger lands on a country with similar symptoms to Nigeria and Somalia. Look at Angola, with its rocketing growth over the last decade; or the frequently-cited success story of Botswana, with its impressive economic indicators. GDP figures might indicate everything is rosy, but scratch the surface and the symptoms described above – dysfunctional education systems and so on – remain. Oil-rich, gas-rich, tanzanite-rich, just-culturally-rich or not-rich-at-all, many African countries suffer from the same syndromes. This makes me wonder if there is a resource curse or if it is instead a leadership curse.

Africa’s asymmetric and trembling growth has its foundations in models primarily designed by and for developed countries. Moreover, its success is – most times wrongfully – measured by its countries’ GDPs alone, leading to occurrences like the misleading example of Nigeria’s recent GDP recalculation.

Crucially, millions of “Maliks” don’t think GDP is relevant when they think about measuring wealth. By Malik’s measure – having the ability to live among his community and from the land – Africa is perfectly placed to create a new kind of growth, by approaching consumption and wealth in a way that isn’t simply about GDP or revenue and that is, instead, about looking holistically to people’s current and future needs and behaviours.

The main challenge for Africa is to reinvent how it grows, in a way that creates opportunities for all. The opportunity to go to a good hospital; the opportunity to attend a competent school and develop technical and intellectual skills; the opportunity of not being discriminated against based on gender; or simply the opportunity to produce a couple more litres of milk and become an abundant farmer instead of a subsistence farmer. The key is having the possibility of living like Malik wanted to, by trading and sharing his goats and vegetables, or choosing a more “westernized” lifestyle.

In order to shape this new kind of growth and reverse this leadership curse, it is fundamental to reinvent leadership itself.

Africa’s “eternal” incumbent leaders – such as Equatorial Guinea’s president, Obiang; his Uganda congener, Museveni; or Cameroon’s head, Biya – have not steered the wheel in the direction of generalised prosperity. They have instead narrowed the chances for anyone else to achieve it.

Africa needs leaders from different disciplines, places and generations, who are capable of challenging the status quo and framing a new development phase. And the importance of involving both policy and business is large. The curse can only be lifted if government, civil society and business leaders collaborate to craft long-term strategies for their countries and people.

In a nutshell, there is a need to develop African leaders who are capable of acting differently. Leaders who not only have a broad understanding of the contextual world but also have an in-depth knowledge and respect for local behaviour. Leaders who are capable of composing a better future by going beyond the golden GDP growth quest or revenues pursuit; and who instead value their ecosystems as a whole: their existing human and natural resources. Leaders who Malik would be proud to go home to.

The big question remains: is Africa ready to overcome these barriers?

See more at http://www.theguardian.com/sustainable-business/xynteo-partner-zone/2015/jan/16/africa-resource-curse-or-leadership-curse?CMP=share_btn_fb

http://amzn.to/1KU6O9N

Ethiopia: Bad governance and abysmal poverty January 5, 2015

Posted by OromianEconomist in Africa Rising, African Poor, Corruption, Corruption in Africa, Free development vs authoritarian model, Illicit financial outflows from Ethiopia.
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O

 

Ethiopia:  Home of  Thousands  of Garbage Scavangers

 http://www.tesfanews.net/ethiopia-home-for-thousands-of-garbage-scavengers/

British journalist Caroline Knowles writes that Addis Ababa’s city dump (aka Koshe) as the main source of survival for many poor Ethiopians.  But, Why the Ethiopian government allow its people to live like this? Is it because they don’t know or because they don’t care?

By Caroline Knowles,

MY first sight of Koshe, Addis Ababa’s giant 50-year-old landfill site, is from the highway. It runs alongside it, and away from the road as far as the eye can see: a giant, murky, grey-brown raised area of partially decomposed rubbish, with occasional bright specks of colour. As my hopes rise from having found it, my heart sinks as I try to take it in.

The interpreter I have engaged for this mission through my contacts, a junior academic at Addis Ababa University, is not keen on going ahead. Leaving the taxi and crossing the highway by the bridge, I try to absorb the panoramic view afforded by this elevated viewpoint over the highway. 

This 36-hectare site – shrinking as the city attempts to regulate it – is patrolled from the air by large vultures, diving into the rubbish. Motley crews of wild dogs gambolling and snatching at the soft ground patrol it at ground level. Smoke rises in several places, adding a layer of haze to the murky colour scheme. Yellow bulldozers nose the heap and shift and level it; municipal rubbish trucks and flatbed trucks with skips arrive from all over the city and discharge their contents.

Between the dogs, the birds and the machines there was something else, something I could only slowly take in: 200 to 300 people, dressed in the same murky hues as the rubbish dump, backs bent, hooks in hand, were working on its surface.

Feeling queasy I walk towards the end of the bridge. In order to reach the steps and the rubbish, I must walk past three young men who are using the vantage point of the bridge for surveillance and information gathering. In an unspoken negotiation I don’t understand, they take in my camera, and my shoulder bag containing digital recorders and money, and let me pass. This silent confrontation, between the comforts of my world and the difficulties of theirs, only further develops my anxieties.

Korah dump in Addis Ababa is home to around 130,000 residents of Addis Ababa who survive from the garbage one way or the other

Descending the steps, I walk to the edge of the dump where I am met by the site supervisor and his aides. They want a stamped authorisation of my visit from the relevant municipal department. What looks like a vast area, open to the surrounding countryside, is as closed to me as a Korean petrochemical plant. I turn back and head into the city to secure the relevant authorisation.

TRASH TALKS

The city dump is an inventory, of a kind, of its material life. Addis in rubbish is not London or Moscow in rubbish. Rubbish provides a crude and deeply flawed account of cities and their social, political and economic contexts. Rubbish displays social, material and income differences.

Indeed, some people’s rubbish provides others with the fabric of their everyday life. Maybe this is the best way to think about Koshe – as a redistribution centre which indexes the differences between people’s life-journeys, refracted through material cultures at their point of disposal.

Korah dump site in Addis Ababa.  Hundreds survive from food that was dumped at the site

Not just the content, the handling of rubbish displays cities too. How cities deal with their rubbish reveals them. It is a major challenge for municipal authorities in Addis, who are only able to deal with two-thirds of the rubbish, distributed in collection points all over a city that is fast expanding – leaving the rest to private contractors and the age-old informal dumping practices on streets and in rivers. Thus rubbish provides a visual commentary on urban citizens’ behaviour as well as the efficacy of municipal governance.

SCRATCHING A LIVING

Getting myself into the rubbish is a story of municipal offices cluttered with old computers, fans, desks, officials and permissions. It is about writing a letter in Amharic explaining what I want to do and why. It is about waiting until the electricity comes back on and we can photocopy my university ID. There are phone calls to the landfill site and arrangements are made. Everybody is charming. I’ve come from London to take a look at the rubbish. Why? I am following a piece of plastic around the world. Really! First world problems!

I go back to Koshe – which means ‘dirty’ in Amharic – and hand over the necessary papers to the site supervisor, in his makeshift office at the roadside of the dump. Minutes later, I am scrambling after him, out on to the rubbish heap, navigating around the dogs which I fear, and the areas where it is soft underfoot and I sink up to my knees. My stomach is churning with fear. My interpreter and I are using Olbas oil to mask the smell.

– – – – – –

– – – – – –

We stop north of the main road, where it is firmer underfoot, in the area where the activity is concentrated. This is the place to which the municipal authorities and the site supervisor direct the trucks to dump their loads. A single white towelling slipper, with the Hilton Hotel logo on it, stands out in the grey-brown mush.

This area is a hive of activity that peaks to a frenetic pace with the arrival of new loads, and then falls away, leaving a more continuous stream of slower activity, and a legacy of dust and smoke that gets in everyone’s eyes.

Korah dump site in Addis Ababa.  Hundreds survive from food that was dumped at the site

As rubbish trucks turn off the main road on to the edge of the site, a group of five or six young men jump on the back and ride to the dumping area with it. This puts them at an advantage for grabbing the best items as the truck discharges its load onto the tip, but not without risk. The mechanism that crushes the rubbish occasionally catches a young man in its deadly and disfiguring grasp.

As the young men jump off with the rubbish and begin picking items that catch the eye, the line of men and women, that has formed along both sides of the truck, spring into action, grabbing items and stashing them in woven plastic sacks. These are held tightly in one hand; in the other a homemade metal hook with a white handle, used to grab and dig into the grey-brown surface of the heap, is held. This hooked instrument earns the pickers – sometimes referred to as scavengers – the name ‘scratchers’.

The moment of discharge unleashes a tense scramble for the most valuable items; a competition in which masculine physical strength prevails, and young, agile, women put up a good fight. Scratchers then go on searching, or rest until the next truck arrives, or regroup around the bulldozers unearthing new bounty. The social and material relationships of the dump demand skilled navigation.

From the vantage point of the dump, the scratchers rework the geographies and hierarchies of the city. The tensest flurries of competitive scratching accompany the arrival of trucks from the most affluent areas, with the best rubbish. The Bole area, with its upscale detached housing, mall, hotels and the international airport, sends the most prized items, the cast-offs of affluence, including waste airline food in large green plastic bags, to the dump. Scratchers collect the food discarded by airline passengers for themselves, leaving a large pool of bright green plastic bags, which attracts a herd of goats.

Korah dump site in Addis Ababa.  Awareness campaign to help the thousands of Addis Ababa residents that survived from the garbage

Rubbish from the central part of the city, from international hotels, the African Union HQ buildings and the embassies, is similarly sought after, and monopolised by the fittest young men. Scratchers recognise the sources of rubbish from the colours and types of trucks used by the different sub-cities and private contractors. And they recognise the drivers and their helpers, who regularly work the same areas. The discarded traces of the city’s more affluent lives, especially foreign residents and visitors, most animate the dump. Rubbish logs social inequalities in cities and provides a minimal redress.

The dump has temporal rhythms. Scratchers know what time the trucks arrive from different parts of the city. From 8am through the morning is the busiest time. The dump is geared to municipal collection and transportation. By 5pm things are dying down as the trucks stop for the night, and the scratching continues with fewer scratchers at a slower pace. Bulldozers moving stuff around and digging into the surface of the dump also provide new scratching opportunities, and a lively crowd gathers around them. Scratching is a 24-hour activity, with people arriving after their working day is over. Some scratchers work throughout the night wearing torches attached to headbands. Scratching it seems is a (stigmatised) way of life as much as a way of getting by.

Within the urban geographies of affluence, materials establish another set of hierarchies. Scratchers search for anything they can use for themselves, or resell. Materials have a value in recycling, providing an afterlife for discarded objects. Metals, including nails, are the most valuable booty, and men dominate this, although a few women have ventured into metals too. Wood has value as firewood. Tourist clothes and shoes can be cashed in at the Mercato salvage section. Some scratchers just come to eat.

But plastics are the most ubiquitous material on the dump, and among plastics, water bottles the scratchers refer to as ‘highland’, after a popular brand of bottled water, dominate, and in this niche women prevail.

Scratchers specialise in particular materials. Specialisms result from advice from experienced scratchers, from serendipity, or from knowledge of shifting recycling prices, gathered at the edge of the dump. Here materials are counted or weighed, and turned into cash, with the agents from factories using recycled materials.

A pile of white dusty material arrives from the leather factory. The dogs take up residence. They are ejected by a group of men, who have decided that this is a good place to sit, while waiting for the next truck.

..Why does the Ethiopian government put resources into regulating who can visit their trash dump to make sure that they don’t get too much bad publicity for how their people are being treated instead of investing those resources into getting people out of the dump?

In their working clothes – they scrub up outside of work and look completely different – scratchers are dressed similarly and grimily, making them the same colour as the rubbish heap. Men wear trousers, shirts and tee shirts, baseball caps and sometimes hoodies to protect their heads from the sun. Women wear scarves and baseball caps, skirts, trousers, t-shirts and blouses. Some carry infants on their backs. All wear sturdy shoes, often trainers.

The scratching population numbers 200–300, but expands after holidays with casual pickers. More women than men do it by a ratio of about three to one, and, while people in their 20s and 30s predominate, ages range from teens to seniors. Most live in the villages around the dump in simple, rusted, corrugated iron dwellings, sometimes with satellite dishes. Rubbish has provided a source of local employment and subsistence for generations over its 50-year history, and is firmly embedded in local calculations of subsistence and accumulation.

About 50 scratchers live in cardboard and plastic makeshift shelters off the edge of the dump, safely away from passing vehicles and next to a pen full of pigs. The rubbish sustains rural arrivals, for whom it works as a gateway to the city, as well as long-term residents, whose rural routes have settled into the past, making them locals.

The ministry and its field agents say that the rubbish dump is a source of dangerous working practices by people who, like the rubbish they sort, are consigned to live beyond the limits of civic life. A litany of accidents, deaths and disfigurements as scratchers take risks to recover value, are recited by the site supervisor:

“Food comes from some place and a guy is going into the truck and he is injured and they take him to hospital but he died. Also someone else lost their legs in an encounter with a bulldozer. Two months ago a man who jumped in the truck dropped off when it broke. In recent accidents, two were women. The bulldozer operator has a lot to do to push the garbage. If they see something they want when the bulldozer moves the garbage, they don’t think about their life.”

In living beyond formal systems of governance, this city suburb of rubbish is more like the Somali borderlands, patrolled by contrabandists and gunrunners, than a part of the city. There is a police station nearby, and policing and the justice system are slowly taking back the dump from a parallel system of authority, a mafia of five ‘big men’. The big men control access by scratchers in exchange for fees, making themselves wealthy in the process. But recently, some of them have been imprisoned, shifting the balance of power towards the authorities.

Once far away, a place outside of the city, outside systems of formal employment, taxation, law and municipal governance, Koshe is now on the edge of a city that has grown to meet it in what are fast becoming its upscale southern suburbs. A new development of large detached houses nearby anticipates this future – new housing for those in a position to benefit from rising prosperity, and a consequent shrinkage and rehabilitation of the landfill site. These changes have far-reaching consequences for the scratchers of Koshe.

– – – – –
NOTE: The above article was first published on The Guardian Newspaper under the title “Inside Addis Ababa’s Koshe Rubbish Tip Where Hundreds Literally Scratch a Living”.  It is an extract from the new book Flip-Flop: A Journey Through Globalisation’s Backroads by Caroline Knowles. (Pluto Press, £18.99).

Source:  Tesfanews.net
Read more at http://www.tesfanews.net/ethiopia-home-for-thousands-of-garbage-scavengers/#IEroeAVG1RmyFU7j.99

POVERTY – Introduction December 25, 2014

Posted by OromianEconomist in African Poor, Amnesty International's Report: Because I Am Oromo, Free development vs authoritarian model, Human Rights Watch on Human Rights Violations Against Oromo People by TPLF Ethiopia, Illicit financial outflows from Ethiopia, Knowledge and the Colonizing Structure. African Heritage. The Genocide Against Oromo Nation, Land and Water Grabs in Oromia, Poverty, The State of Food Insecurity in Ethiopia, Uncategorized, Youth Unemployment.
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OPovertyPoverty

‘Poverty is not merely going hungry; it means lack of resources like land or education to make out a living; means lack of employment; means lack of access to some basic needs of life like health services, education, food etc., means lack of voice to be heard and ability to influence the formulation of policies or implementation of programs by the government.

Poverty may also be understood as an aspect of unequal social status and inequitable social relationships, experienced as social exclusion, dependency, and diminished capacity to participate, or to develop meaningful connections with other people in society. This is of considerable relevance to the Indian situation. …Dominant sections of ethnicity in the society controls the political conditions and assets, depriving the marginalized from having access to these economic assets. ‘

Definition : Poverty is a situation where the individual or community lack the resources, ability to meet the basic needs of life.

Relative Poverty: Refers to lacking a usual or socially acceptable level of resources or income as compared with others within a society or country.

Penury : Extreme poverty.

Absolute Poverty: is destitution wherein one lacks basic human needs including clean water, food, clothing, shelter, health cover and education.

The World Bank defines poverty in absolute terms. According to them, the poverty is classified into:

Extreme Poverty : Living on less than US $1.25 per day
Moderate Poverty : Living on less than US $2 a day

Am an aspirant too

Definition : Poverty is a situation where the individual or community lack the resources, ability to meet the basic needs of life.

Relative Poverty: Refers to lacking a usual or socially acceptable level of resources or income as compared with others within a society or country.

Penury : Extreme poverty.

Absolute Poverty: is destitution wherein one lacks basic human needs including clean water, food, clothing, shelter, health cover and education.

The World Bank defines poverty in absolute terms. According to them, the poverty is classified into:

  • Extreme Poverty : Living on less than US $1.25 per day
  • Moderate Poverty : Living on less than US $2 a day

World Bank has stated that fighting with poverty is at the core of its work.

According to the definition of poverty by the World Bank, the poor are classified as:

  • Subjugate Poor : People with per capita consumption expenditure as…

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Subprime Borrowers: Sub-Saharan Africa’s Eurobond borrowing. #Ethiopia. #Africa December 19, 2014

Posted by OromianEconomist in Africa, Africa and debt, Free development vs authoritarian model, Illicit financial outflows from Ethiopia, Sub-Saharan Africa's Eurobond borrowing.
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 Oloan  default

‘…So, are shortsighted financial markets, working with shortsighted governments, laying the groundwork for the world’s next debt crisis?…’

Joseph E. Stiglitz and  Hamid Rashid

http://www.project-syndicate.org/commentary/sub-saharan-africa-s-subprime-borrowers-by-joseph-e–stiglitz-and-hamid-ras

(NEW YORK) – In recent years, a growing number of African governments have issued Eurobonds, diversifying away from traditional sources of finance such as concessional debt and foreign direct investment. Taking the lead in October 2007, when it issued a $750 million Eurobond with an 8.5% coupon rate, Ghana earned the distinction of being the first Sub-Saharan country – other than South Africa – to issue bonds in 30 years.
This debut Sub-Saharan issue, which was four times oversubscribed, sparked a sovereign borrowing spree in the region. Nine other countries – Gabon, the Democratic Republic of the Congo, Côte d’Ivoire, Senegal, Angola, Nigeria, Namibia, Zambia, and Tanzania – followed suit. By February 2013, these ten African economies had collectively raised $8.1 billion from their maiden sovereign-bond issues, with an average maturity of 11.2 years and an average coupon rate of 6.2%. These countries’ existing foreign debt, by contrast, carried an average interest rate of 1.6% with an average maturity of 28.7 years.

It is no secret that sovereign bonds carry significantly higher borrowing costs than concessional debt does. So why are an increasing number of developing countries resorting to sovereign-bond issues? And why have lenders suddenly found these countries desirable?
With quantitative easing having driven interest rates to record lows, one explanation is that this is just another, more obscure manifestation of investors’ search for yield. Moreover, recent analyses, carried out in conjunction with the establishment of the new BRICS bank, have demonstrated the woeful inadequacy of official assistance and concessional lending for meeting Africa’s infrastructure needs, let alone for achieving the levels of sustained growth needed to reduce poverty significantly.
Moreover, the conditionality and close monitoring typically associated with the multilateral institutions make them less attractive sources of financing. What politician wouldn’t prefer money that gives him more freedom to do what he likes? It will be years before any problems become manifest – and, then, some future politician will have to resolve them.
To the extent that this new lending is based on Africa’s strengthening economic fundamentals, the recent spate of sovereign-bond issues is a welcome sign. But here, as elsewhere, the record of private-sector credit assessments should leave one wary. So, are shortsighted financial markets, working with shortsighted governments, laying the groundwork for the world’s next debt crisis?
The risks will undoubtedly grow if sub-national authorities and private-sector entities gain similar access to the international capital markets, which could result in excessive borrowing. Nigerian commercial banks have already issued international bonds; in Zambia, the power utility, railway operator, and road builder are planning to issue as much as $4.5 billion in international bonds.
Evidence of either irrational exuberance or market expectations of a bailout is already mounting. How else can one explain Zambia’s ability to lock in a rate that was lower than the yield on a Spanish bond issue, even though Spain’s credit rating is four grades higher? Indeed, except for Namibia, all of these Sub-Saharan sovereign-bond issuers have “speculative” credit ratings, putting their issues in the “junk bond” category and signaling significant default risk.
Signs of default stress are already showing. In March 2009 – less than two years after the issue – Congolese bonds were trading for 20 cents on the dollar, pushing the yield to a record high. In January 2011, Côte d’Ivoire became the first country to default on its sovereign debt since Jamaica in January 2010.
In June 2012, Gabon delayed the coupon payment on its $1 billion bond, pending the outcome of a legal dispute, and was on the verge of a default. Should oil and copper prices collapse, Angola, Gabon, Congo, and Zambia may encounter difficulties in servicing their sovereign bonds.
To ensure that their sovereign-bond issues do not turn into a financial disaster, these countries should put in place a sound, forward-looking, and comprehensive debt-management structure. They need not only to invest the proceeds in the right type of high-return projects, but also to ensure that they do not have to borrow further to service their debt.
These countries can perhaps learn from the bitter experience of Detroit, which issued $1.4 billion worth of municipal bonds in 2005 to ward off an impending financial crisis. Since then, the city has continued to borrow, mostly to service its outstanding bonds. In the process, four Wall Street banks that enabled Detroit to issue a total of $3.7 billion in bonds since 2005 have reaped $474 million in underwriting fees, insurance premiums, and swaps.
Understanding the risks of excessive private-sector borrowing, the inadequacy of private lenders’ credit assessments, and the conflicts of interest that are endemic in banks, Sub-Saharan countries should impose constraints on such borrowing, especially when there are significant exchange-rate and maturity mismatches.
Countries contemplating joining the bandwagon of sovereign-bond issuers would do well to learn the lessons of the all-too-frequent debt crises of the past three decades. Matters may become even worse in the future, because so-called “vulture” funds have learned how to take full advantage of countries in distress. Recent court rulings in the United States have given the vultures the upper hand, and may make debt restructuring even more difficult, while enthusiasm for bailouts is clearly waning. The international community may rightly believe that both borrowers and lenders have been forewarned.
There are no easy, risk-free paths to development and prosperity. But borrowing money from international financial markets is a strategy with enormous downside risks, and only limited upside potential – except for the banks, which take their fees up front. Sub-Saharan Africa’s economies, one hopes, will not have to repeat the costly lessons that other developing countries have learned over the past three decades.

Read more at http://www.project-syndicate.org/commentary/sub-saharan-africa-s-subprime-borrowers-by-joseph-e–stiglitz-and-hamid-rashid#zK6cbc9Gry8MoJrX.99

http://www.theguardian.com/business/economics-blog/2013/jun/26/subsaharan-africa-eurobond-borrowing-debt

 

The following is the case study on Ethiopia from  Opride Contributors http://www.opride.com/oromsis/articles/opride-contributors/3781-sovereign-bond-may-prove-to-be-a-nightmare-for-ethiopia

SOVEREIGN BOND MAY PROVE TO BE A NIGHTMARE FOR ETHIOPIA 

By J. Bonsa

Ethiopian has recently joined the sovereign bond market, where governments sell debt to investors with a guarantee that they would pay periodic interest rates and the initial investment value at maturity.The bulk of sovereign bonds are bought by institutions and governments, individual investors constitute a relatively small proportion of total bond buyers. Sovereign bonds are often denominated in local currencies.

Ethiopia’s foray into the sovereign bond market has raised eyebrows in the world of financial market for at least three reasons. First, Ethiopia is the poorest country ever to venture into this market.  Second, the real value of Ethiopia’s currency has been deteriorating at alarming rates, devalued by close to 40 percent in the last three years alone. Third, the108-page long prospectus that the Ethiopian government prepared and submitted to formally enter the market contained astonishing revelations. In a bizarre twist, the government made unfamiliar and strange declarations about risks associated with purchasing the bond it is about to issue.

Among other things, authorities warned about: famine, Ethio-Eritrean war, social unrest and upheaval in the aftermath of the May 2015 election. These are extra-ordinary admissions of risks to a scale not heard in this market before. But what is the motive of the Ethiopian government in exhibiting such an extraordinary behavior? What are the triggers for the move to enter the sovereign bond market? In this piece, I will attempt to seek answers to these questions.

Carrot and stick

The local English weekly Addis Fortune reported rumors in Addis Ababa that the unusual admission of the risks was due to naivety of junior staff. However, central government in Ethiopia is known for ordering lower level units to do things a certain way only to deny involvement to avoid blame at a later stage. For example, federal government officials often deny and attribute human rights abuses to local authorities. The latest screw up seems to be an extension of that logic to international diplomacy. The fact that this rumor was leaked through a pro-government newspaper provides further clue about some sinister motives beyond a simple act of incompetence by those who prepared the prospectus.

It is likely that the government used the document as a carrot and stick tactic aimed at Western governments.  An evidence of this comes from the revelations about Ethiopia’s “credit lines from China and Chinese entities accounted for 42 per cent of all external loan disbursements in 2013-14, and for 69 percent in 2012-13.” This fact underscores Ethio-Chinese partnerships have been considerably strengthened. Western countries, particularly the U.S., recognize Ethiopia’s support in the global fight against terrorism. But they also know that that support has often been offered to them so officiously with hidden motives, which at times jeopardized Western interests in the Horn of Africa.

The issuance of the sovereign bond and rare admission about the scale of Ethio-China relations appear like a warning to the U.S.: Buy the bond generously if you want to stop us from lurching toward China. The categories of hazards the government chose are even more telling. For instance, the possibility of another war with Eritrea is inserted to gain sympathy and also imply that terrorism is still rampant in Horn of Africa. The likelihood of social unrest after the next election is meant to warn the West that they should not seriously consider pressing the government on human rights and democratization.

Other motivations are rooted in domestic politics. The government knows that the risks are real and investors will find out sooner or later. In that case, by declaring the risks upfront, the regime tries to present itself as a brutally honest and transparent government. In doing so, they might be trying to pre-empt opposition claims about lack of transparency in areas of governance and economic management.

Liquidity crisis

The Ethiopian government has a strange habit of biting more than it could chew. For example, it plans to invest about $5.1 billion per year over the next decade on mega infrastructural projects: power, roads, and telecommunications. Another $6 billion is required to build a 2.4 thousands km railway network. The construction of the Grand Ethiopian Renaissance Dam (GERD) on the Nile River is expected to cost about $4.8 billion. The World Bank has warned that this level of investment (more than 40 percent of GDP and three times the $1.3 billion in infrastructure spending that the country managed during the mid-2000s) is well beyond the country’s modest means.

This created a self-inflicted wound in the form of a very messy liquidity crisis: an acute shortage or drying up of funds in the economy. This crisis is the main trigger for the foray to the sovereign bond market. The shortage of funds is specially manifested in difficulty to borrow funds from the banking system. The crisis has been around in the Ethiopian economy for a good part of the last decade. The government left no stone unturned in the sphere of the domestic economy to overcome the severe liquidity crisis.

But the regime squandered huge sums of free grants and concessionary or low interest loans from donors, annual net-inflows in the upwards of $2 billion, excluding other humanitarian aid.

The debacle from the 2005 election and the 2009 Charities Law, which restricted operations of foreign NGOs, saw a noticeable reduction in foreign aid. The government had to seek non-concessionary loans, particularly from China, to finance its mega projects. Meanwhile, the ill-designed project locations in less productive sectors or regions means sharp declines in export earnings.

For much of the last decade, the government simply printed more and more birr and engaged in a spending spree. However, a limit was reached when inflation hit the roof, approaching 60 percent in 2008. Fearing political backlash through social unrest and also due to pressures from international financial institutions, the government backed down from its inflationary financing strategy.

Involuntary savings

Absent foreign funds, the government maintained a dogged determination and vowed to proceed with the mega projects by entirely relying on domestic savings. This began with sales of government savings bonds to domestic institutions, to raise about $892.2 million in five years. Obviously, this was not realistic. About 70 percent of Ethiopians still live in extreme poverty, and one cannot expect households to voluntarily save even a small proportion of the target amount of saving. Consequently, the government resorted to force savings, using unorthodox methods.

The involuntary savings was accompanied by an intensive propaganda campaign to rally the public around the mega infrastructural projects by creating wartime like atmosphere. It is not only “unpatriotic” to question the suitability or merit of the large projects, it borders with criminality to express any reservations specifically about the GERD. Every civil servant has been forced to buy a saving bond paying her one-month salary in 12 installments. They have also made a relentless but unsuccessful campaign to entice the Ethiopian diaspora. The perverse method applied to sell bonds to households was followed by an even more crude procedures meant to force bonds on the business community. Private Banks have been compelled to purchase bonds equivalent to 27 percent of their annual loans. However, this does not apply to government owned banks. Banking is effectivelygovernment monopoly, the three major state-owned banks hold 73 percent of the total bank assets in the country, 63 percent for the Commercial Bank of Ethiopia alone.

The extent of ignorance among Ethiopia’s policy makers is baffling. The involuntary saving is meant to boost public investment expenditure, which is part of aggregate demand that fuels economic growth. But the authorities grossly overlooked the very act of involuntary saving is bound to reduce the other components of expenditure — household consumption expenditure on goods and services as well asbusiness investment expenditure.  Sure enough, the government has belatedly realized there was a limit to achieving their goals through involuntary savings, and with all options in the domestic economy already exhausted.

Sovereign bond

The sovereign bond saga is a yet another maneuver to raise funds the government so desperately needed to finance the ill-conceived mega projects. This time the movement is on a less comfortable and unfamiliar terrain beyond Ethiopia’s borders, in the international market arena where the regime cannot apply brute methods to enforce bond purchases. Perhaps for the first time in its rein, Ethiopia’s ruling party will have to play by the rules.

Accordingly, it set out with a calculated move to secure a “sound” credit rating from known global agencies. In a quick succession during the first half of May 2013, credit rating agencies offered the government exactly what it needed. Fitch Ratings and Moody’s assigned ‘B’ and ‘B1’ ratings to Ethiopia, respectively. These endorsements opened the door for a debut on international capital markets.

However, the government rhetoric notwithstanding, most economic analysts know that the fundamentals of the Ethiopian economy have not reached the level that warranty the kinds of credit ratings offered to Ethiopia. For instance, in May 2012, three months before Meles Zenawi died, theEconomist observed:

JUST how sustainable is Ethiopia’s advance out of poverty? This is a vexed topic among bankers and others in Ethiopia who hold large wads of birr, the oft devalued currency. Despite hard work by the World Bank, oversight from the International Monetary Fund, and studies by economists from donor countries, it is not clear how factual Ethiopia’s economic data are. Life is intolerably expensive for Ethiopians in Addis Ababa, the capital, and its outlying towns. Some think Ethiopia’s inflation figures are fiddled with even more than those in Argentina. Even if the data are deemed usable, the double-digit growth rates predicted by the government of Prime Minister Meles Zenawi look fanciful.

Similarly, soon after Ethiopia received the favorable credit ratings, the International Monetary Fund“warned that the pace of accumulation of public sector debt to finance major investments in dams, factories and housing construction “deserves close attention.”’ Given these reservations about the credibility of Ethiopian authorities, it is perplexing as to why the ratings agencies endorsed Ethiopia to enter the global capital market.

This could have happened only if Ethiopian authorities have utilized their familiar strategy: buying the services of powerful and highly connected lobbying firms. This has become a familiar last resort forauthoritarian regimes in Africa. Ethiopia reportedly allocates a sizeable budget to pay for prohibitively expensive lobbyist service fees.

Public sector debt has been growing at alarming rate. As Horn Affairs reported recently, “Ethiopia’s public sector debt grew threefold in the past five years. The total outstanding external debt surged from $5.6 Billion in 2009/10 to $14 Billion in 2013/14.”These are increasingly becoming commercial or non-concessionary loans such as those from China. Ethiopia’s premature entry into the sovereign bond market amounts to adding fuel to a flame.

IMF predicts Ethiopia’s “total debt to GDP increases from 24 percent to 48 percent of GDP in 5 years, posing risks to debt sustainability. External commercial borrowing entails risks even under the assumption of a highly efficient big-push public investment program.”  This means unlike in the past when funds have been flowing in through free grants or soft loans, debt servicing will soon become a huge burden on the Ethiopian economy, given the government’s wasteful investment and a shift from soft to commercial loans. However, it is anybody’s guess whether or not the regime will stay long enough to face the consequences of its decisions.

*The writer, J. Bonsa, is a regular OPride contributor and researcher-based in Asia.

http://www.opride.com/oromsis/articles/opride-contributors/3781-sovereign-bond-may-prove-to-be-a-nightmare-for-ethiopia

People of #Africa, you are citizens, not slaves. Rise up and demand what is yours and remove the people who have stolen it from you says Oby Ezekwesili at the RAS annual lecture. #Oromia December 12, 2014

Posted by OromianEconomist in Africa, Africa and debt, Africa Rising, African Poor, Corruption in Africa, Ethiopia's Colonizing Structure and the Development Problems of People of Oromia, Afar, Ogaden, Sidama, Southern Ethiopia and the Omo Valley, Free development vs authoritarian model, Illicit financial outflows from Ethiopia, UK Aid Should Respect Rights.
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O

Citizens of Africa Arise! You have nothing to lose but your chains, says Oby Ezekwesili – By Richard Dowden in African argument.

http://africanarguments.org/2014/12/11/citizens-of-africa-arise-you-have-nothing-to-lose-but-your-chains-says-oby-ezekwesili-by-richard-dowden/

 

Oby

It is not often you hear a Vice President of the World Bank calling for revolution, but Oby Ezekweseli did just that at the Royal African Society’s Annual Lecture last week.

There is an unwritten rule among politicians globally that they do not rubbish their rulers when they are abroad, but Oby – who would not describe herself as a politician – did not hold back.

We should have guessed how fired up she was when the former minister in President Obasanjo’s government in Nigeria and World Bank Vice President set the title:  “Africa Rising? What will happen when her citizens arise?” You can watch her presentation here

She traced the lack of participation by the vast majority of Africans in their own development over the past 50 years which has left 70 – 80% of them absolutely poor. She blamed the “parasitic” African elites, not just for looting their countries, but for preventing any of the benefits of economic growth reaching their people. Her own country, Nigeria, is very rich but has some of the worst human development figures in the world.

She also pointed out that external actors, the aid donors, the World Bank and the IMF who drove the structural adjustment economic reforms of the 1990s and 2000s and left African citizens with no part to play in making the national choices for development. These reforms were necessary, she said, but “externals cannot give development to any country or any people… The ownership of the process by African citizens has been the missing link.”

Dismissing the current crop of African rulers, she expressed her pride in the people of Burkina Faso for the uprising that ejected President Blaise Compaoré

, who ruled there for 27 years. The leaders “absolutely don’t care” about their own citizens, she said, but spend their time among the global elite “all of whom have each other’s’ phone numbers”.

The next stage of development, said Oby, can only be done with the participation of the people, “no external force can do that…The change you have been waiting for will not come from the elite class waking up and having an epiphany. The change has to be made by the people. They are the only ones who can.”

And she urged the African diaspora to return to Africa and lead the struggle, a remark that created a moment of awkwardness in the room I noticed.

But I am sure you will agree this was an inspiring, energising message: People of Africa, you are citizens, not slaves. Rise up and demand what is yours and remove the people who have stolen it from you. Could the removal of Compaoré

by mass demonstrations followed by the refusal to accept an interim military ruler be the beginning of an Africa-wide trend as a 21st Century generation comes of age? It is not the usual message that you hear from African ministers or the World Bank.

But there is an anomaly here. If Oby is right then the most democratic countries with the most widespread political participation would be the most prosperous. And the most equal in terms of sharing the national cake. But this is not so.

Put aside the oil and mineral-rich countries in Africa, and, as Oby pointed out, you find that the fastest growers are those with stability and strong institutions such as effective ministries that deliver health and education to their people. In turn these attract aid and investment. These countries are Rwanda, Ethiopia, Uganda, Mozambique and Tanzania.

But what else do they have in common? Ethiopia and Rwanda are top-down dictatorships ruled by parties that fought their way to power and have ruled since 1991 and 1994 respectively. They deliver health and education to their people but they do not allow freedom of speech or association. Their media are tightly controlled. Uganda is a less powerful dictatorship but President Yoweri Museveni also came to power through the barrel of a gun in 1986 and his army has controlled the country ever since. The ‘Walk to Work’ mass movement in 2011, which complained about lack of services and high prices, was brutally suppressed.

Museveni was forced by aid donors to open up politics and he now has to put up with a rumbustious parliament and a moderately free press. A grumpy population, especially in the capital, might vote for someone else if they were sure that someone was allowed to run in a fair election. That is unlikely. At election times the state, including the police and the army, is an extension of the ruling party.

Mozambique and Tanzania are still run by the parties that led those countries at independence. Both will soon become exceedingly rich because of oil and gas; God-given resources that are profoundly anti-democratic. Oil-rich countries do not need to raise taxes from their people, they mainline millions from oil companies straight into the treasury. So whoever is in power when those revenues begin to flow may stay there for decades. There is still some democratic space in these countries and there are real national debates with opposition parties in both of them, although it is unlikely that an opposition party could win without provoking violent reactions from the ruling parties.

So is benign dictatorship the best Africans can hope for? There are certain advantages – stability and consistency. The downside is that it is dangerous to think or speak out so there is no national debate. Meanwhile new generations emerge – especially in Africa where birth rates are high – and dictators become out of touch. If the new generation follow Oby Ezekwesili’s call, Africa will remain exceedingly interesting and exciting and should also become prosperous and powerful.

 

See more @ http://africanarguments.org/2014/12/11/citizens-of-africa-arise-you-have-nothing-to-lose-but-your-chains-says-oby-ezekwesili-by-richard-dowden/

Draining development: illicit flows from Africa October 21, 2014

Posted by OromianEconomist in Africa, Africa and debt, Africa Rising, Aid to Africa, Corruption, Corruption in Africa, Ethiopia's Colonizing Structure and the Development Problems of People of Oromia, Illicit financial outflows from Ethiopia, The 2014 Ibrahim Index of African Governance, UK Aid Should Respect Rights, Youth Unemployment.
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Draining development: illicit flows from Africa

Since 1970, Africa has lost at least $854 billion through capital flight which is not only enough to wipe out the continent’s total external debt of $250 billion but leaving around $600 billion for poverty alleviation.

By Menelaos Agaloglou

corruption-empireOctober 21, 2014 (Open Democracy) — Illicit flows are difficult to measure due to lack of reliable data. Global Financial Integrity in 2008 reported that Africa has lost between $854 billion and $1.8 trillion in the last four decades.

The flows seeking higher returns are directed towards western financial institutions and the process is being facilitated by tax havens, trade mispricing (by overpricing imports and underpinning exports on customs documents, residents can illegally transfer money abroad), fake foundations and money-laundering techniques.

Sometimes it is a response to economic and political instability or to high taxes placed on international trade. Frequently it is a way of hiding the illegal accumulation of wealth owed to corruption or criminal activity. Additionally, massive illicit flows can also be a reaction to a defaulting government debt or to a lost confidence on the economic strength of the country.

These outflows of capital seriously harm the efforts for poverty alleviation and socio-economic development. In the first place, investment has decreased, yielding negative implications for job creation, improvement of infrastructure and industrialization.

Illicit flows of money harm economic growth by stifling private capital formation and causing the tax base to remain narrow. Since it drains hard currency reserves, it encourages poor countries to borrow money from abroad making their debt crisis worse and curtailing public investment further. This burden is paid more by the poor since high levels of unemployment and increased inflation affects them more. Illicit flows increase inequality that can lead to political tensions and further poverty.

Interestingly, Africa has become a net creditor to the world despite its global image as an inactive recipient of aid and loans. It has the highest share of private external assets among developing regions. Since 1970, Africa has lost at least $854 billion through capital flight which is not only enough to wipe out the continent’s total external debt of $250 billion but leaving around $600 billion for poverty alleviation and pro poor growth.

Africa is the largest recipient of aid in the world. Vast amount of resources are being spent every year with the task of achieving poverty reduction and meeting the Millennium Development Goals.

But what’s the point of sending money in the region if the region sends it back? For the region as a whole, illicit outflows outpaced official development assistance by a ratio of around 2:1. Taking other statistics into account, developing countries lose at least $10 through illegal flight for every $1 they receive via the aid regime. It is logical to conclude here that it would have been more beneficial to keep the locally produced wealth and invest it in the continent rather than waiting for aid from abroad to safeguard basic needs.

A serious inquiry that needs further investigation is what exactly this amount (between $1 trillion and $2 trillion) being lost means in terms of schools, hospitals and infrastructure. For example, the Education For All 2011 report stated that current aid levels fall short of the $16 billion required annually to close the external financing gap in low-income countries.

This crime kills the economic chances of the region. In 1970 it sent abroad 2% of Africa’s GDP, in 1987 it sent abroad 11% and 8% of its 2007 GDP. Illicit outflows from Africa grew at an average 12% a year over the four decades. To have a chance to meet the Millennium Development Goals, African countries must attack the illicit outflow and try to recover what is now held abroad. If the amount lost could be returned, then development can be achieved painlessly with local resources finally putting an end to aid dependency.

Economic growth without reform that can keep the wealth locally reinvested will lead to more illicit capital flight, and not to less. Sub Saharan Africa had high growth-rates over the last decade. Illicit outflows have also increased during this period. If the resources gained from growth cannot be invested locally then pro poor growth will not be achieved and the continent will continue suffering from extreme poverty. The region crucially needs diversification of its economy, research and development in relation to its agriculture and an expansion of its social services both in urban and rural areas. Only locally-led efforts, with local resources, can succeed in bringing prosperity.

Former South African president Mbeki blamed multinational companies for the flow of capital out of Africa, whereas other people are blaming the growing African elite for wanting higher returns for their money. The alternative view is that this economic problem of the outflow of money is just one of the consequences of the real problem that generates all others: in many African countries, governments (even the whole apparatus of the state) lack legitimacy, and their policies and actions do not represent the whole of society but special groups with economic and political power. In most African countries there is no bargain among groups; just the imposition of power by a small elite.

An effective state can tax its citizens with a political settlement, a rational consensus between state and citizens whereby taxes will be used to further guarantee and protect their interests. At this point we can start perceiving the problem of illicit flows more as a political problem and less an economic one. It is necessary for African societies to address their weak state legitimacy by becoming more open political units, which will integrate the different groups from the societies they supposedly lead. On the other hand businessmen, in order to keep their wealth inside their countries, need to be sure that they will profit with a positive real rate of interest. Serious macroeconomic policies, such as lower fiscal deficits, low inflation and reduced monetary expansion need to follow.

In conclusion, capital flight places the whole burden of solving the problem upon African countries. However one views the problem, either as an economic or a political one, the burden is placed on these societies to solve problems through their own efforts.

It is true that African financial institutions are the smallest and least developed in the world. It is also true that they are not transparent – probably a symptom of their connection with the political establishment which also lacks credibility among the locals. But credibility, transparency and legitimacy are central ideas to development. It would be wiser to start our development discussions from these basics rather than wasting more resources and time setting more and more millennium goals.

About the author

Menelaos Agaloglou is the Head of Geography in the International Division of the Greek Community School in Addis Ababa. He is a researcher of the Center of Middle Eastern and Islamic Studies (CEMMIS), part of the University of Peloponnese in Greece. He has taught Conflict Resolution and English in the University of Hargeisa in Somalia and Social Studies at the Ahmadiyya elementary school in Sierra Leone.

Read @ Open Democracy     http://ayyaantuu.com/horn-of-africa-news/draining-development-illicit-flows-from-africa/

 

The Four Types of Africa’s Corrupt Power Elites: How to be Corrupt in Africa October 10, 2014

Posted by OromianEconomist in Africa, Africa Rising, Colonizing Structure, Corruption in Africa, Illicit financial outflows from Ethiopia, Land and Water Grabs in Oromia, Land Grabs in Africa, The 2014 Ibrahim Index of African Governance, The Colonizing Structure & The Development Problems of Oromia, The Tyranny of Ethiopia, Undemocratic governance in Africa, US-Africa Summit, Youth Unemployment.
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 (picture: TPLF/Ethiopia’s corruption Empire)

 

 

 

 

 

SHAPE OF THE CONTINENT: How to be, or not to be, corrupt in Africa where one size does not fit all

Christin Mungai, Mail & Guardian Africa

 

 

 

 

SOUTH Africa is awash with stories of corruption scandals touching on key public figures; from President Jacob Zuma on one end, to opposition leader Julius Malema on the other.

All is not well in Africa’s richest economy. However, recent reports paint an even bleaker picture for the continent in general. One noted that “acording to most of the available indicators, the war on corruption is at a standstill. In fact, these indicators show that corruption is actually increasing in countries where its impact is likely to be most harsh”.

How bad is it and, most importantly, WHY does it happen? We think a large part of it is down to the nature of the various states in Africa.

We took the scores of African countries in two indicators from the latest Fragile States index compiled by Foreign Policy: factionalised elites and state legitimacy. The former measures conflict and competition among local and national leaders, while the latter measures corruption and other measures of government performance and electoral process.

We plotted each country’s deviation from the mean on the two indicators, and the resulting scatter diagram suggests intriguing things about African states; especially how much is “up for grabs”, but more importantly, how the corrupt are corrupt – the strategies which would work if you were looking to loot public coffers.

 

 

See infographics @ https://magic.piktochart.com/embed/3030773-untitled-infographic

 

The Ones who Share Nicely

In the top right quadrant are the “democracy star-performers” – Mauritius, Botswana and Namibia are the far outliers, as well as countries like Ghana, South Africa, Lesotho, Tanzania, Benin and Senegal (mouse over the coloured dots to see specific countries). The countries in this have low competition among elites, and a high level of state legitimacy: citizens feel they have a stake in the country, their votes matter and they can hold leaders accountable.

On the surface, it seems that these countries have mature democratic processes and are committed to the rule of law. But it might also suggest something else – that where corruption exists, there is an “elite consensus” on graft, which means that leaders do not fight for the pie today because they know their turn will come with the next (democratic) election when they win power. Ghana is a good example here – there isn’t that overt looting of state coffers that you might see in other African countries, but you can still benefit illegally from public funds – if you play nicely.

The strong state in these countries also suggests that in order to be steal public money in this countries, you have to “formalise corruption”. In other words, because the state is strong, you have to use formal channels to enrich yourself – lobbying Parliament to make rules in your favour would work here. South Africa is the classic case here – Black Economic Empowerment (BEE), for example, was intended to reduce the economic disparity between racial groups entrenched during apartheid, but it has morphed into a vehicle for a few well-connected black businessmen to enrich themselves – this class of nouveau riche beneficiaries is disparagingly called “tender-preneurs”. But even that name suggests that to benefit from state largesse, you have to have a modicum of formality – you have to register a company, fill and submit tender forms, etc. In these countries, you can’t just ride roughshod into the Treasury.

How to win: Be literate, learn how to write a proposal, and know how to do cocktail chit-chat.

The Ones who Only Share among Themselves

In the top left quadrant are a number of countries that have a high level of state legitimacy – they score high in governance and fighting corruption – but they also have high competition between elites. Rwanda and Ethiopia show up here, two countries which have a military-turned-civilian regime in power. In Rwanda’s case it is the Rwanda Patriotic Front (RPF), while in Ethiopia’s case it is Ethiopian Peoples’ Revolutionary Democratic Front. In these countries, elections are not fiercely fought for across the board (the Parliamentary contest might be hot, but not that for president or prime minister) as it is almost taken for granted that the ruling party and/or its candidate will win.

So something else plays out here: internal competition within the party is intense, but you have to be “one of us” to be a legitimate player in the game. So we see these regimes coming down hard on “dissidents” because the game can only be played within the boundaries and uniformity of the ruling party. In Rwanda, for example, perhaps the reason openly gorging yourself from the public coffers is frowned upon here is because “everyone can’t do it” and it would make certain individuals stand out, not necessarily because it’s wrong. Liberia and Mauritania also feature here, but for different reasons: Liberia has a long history of a “ruling class”: Americo-Liberians, descendants of freed slaves, ruled the country exclusively since independence in 1847 until 1980, so to be in the game, you just had to be “one of them”. Mauritania also has a ruling class called the “white Moors”. So the elite can fight among themselves – Mauritania, for example, has  had a dozen coups or attempted coups since independence from France in 1960—but they firmly shut the door to outsiders.

How to win: Join the party, but always watch your back.

The Ones who Don’t Share

In the lower right quadrant are countries like Angola, Burkina Faso, Gabon, Republic of the Congo and Swaziland. They score low on competition among elites, but high on corruption. Why aren’t the elite fighting among themselves? Here, the reason for this disparity might be simple: the elite has entrenched themselves firmly into power, they have sunk their roots deep into the state system, and aren’t going anywhere. But there’s a difference between them and The Ones who Only Share among Themselves –the ruling class is small enough to keep “eating”, so there isn’t any need for competition within that small group. Swaziland is an absolute monarchy, so it perfectly embodies this “total exclusivity”.

Ruling elites here have a steady income supply, like oil (or royal tributes), to provide an endless bonanza – and it explains why most of them have had long regimes in power, twenty years or more: Jose Eduardo dos Santos in Angola, Blaise Compaore in Burkina Faso, the Bongo dynasty in Gabon, Denis Sassou-Nguesso (with a short interruption) in the Congo and King Mswati in Swaziland have all been in power for more than 20 years). There just isn’t any real competition; and luckily, the money is enough to keep everyone who matters happy. In Angola, for example, President Jose Eduardo dos Santos family controls practically all the major sectors of the economy: his daughter Isabel is famously Africa’s first female billionaire, with assets in telecoms, banking and diamonds; daughter Tchize runs a television and communications network; son Coreon Dú is a music producer and singer; and son José Filomeno heads the country’s sovereign wealth fund.

How to win: Marry into the family and live quietly.

The Free for All: “Democratically Corrupt”

In the lower left quadrant are the conflict-plagued states: Somalia, Sudan, South Sudan, others with widespread civil strife – such as Zimbabwe, Libya and Eritrea – as well as others which, on the surface, aren’t “quite so failed”- Kenya, Uganda, Cameroon and Nigeria. These countries have the bad scores, both in the level of corruption and in the factionalisation of elites. Corruption here isn’t exclusive to some long-established ruling elite, or to any formal party structure. Outsiders do have a chance of getting in, but there isn’t enough to go around – the elite is too large, and there are too many vested interests.

It means that elections tend to be a “winner-take-all” scenario, fiercely fought on the ground. Still, there’s a silver lining here: the fact that politicians are fighting for citizen’s votes suggests that votes actually count. But here, there isn’t really an expectation to play nicely, or share with others, so we see lots of rogue behaviour, elites tend to thrive on chaos and unpredictability. The weakness of the state gives rise to strong lawless groups – such as Boko Haram or al-Shabab – and the country is vulnerable to civil strife.

How to win: Be a bully, and never, ever show any weakness.

 

http://mgafrica.com/article/2014-10-09-the-four-africas

 

http://mgafrica.com/article/2014-10-09-the-four-africas/

Ethiopia: Prevalence of undernourishment &the state of food insecurity (in 2012-2014 FAO World Report) September 21, 2014

Posted by OromianEconomist in Africa, Africa and debt, Africa Rising, African Poor, Ethiopia & World Press Index 2014, Ethiopia the least competitive in the Global Competitiveness Index, Ethiopia's Colonizing Structure and the Development Problems of People of Oromia, Ethiopia's Colonizing Structure and the Development Problems of People of Oromia, Afar, Ogaden, Sidama, Southern Ethiopia and the Omo Valley, Food Production, Free development vs authoritarian model, Genocidal Master plan of Ethiopia, Illicit financial outflows from Ethiopia, Poverty, The extents and dimensions of poverty in Ethiopia, The Global Innovation Index, The State of Food Insecurity in Ethiopia, The Tyranny of Ethiopia, US-Africa Summit, Youth Unemployment.
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The absolute number of hungry people—which takes into account both progress against hunger and population growth—fell in most regions. The exceptions were Sub-Saharan Africa, North Africa, and West Asia.

 

 

The 2014  FAO’s report which is published in September  indicates that while Sub-Saharan Africa is the worst of all regions in prevalence of undernourishment and  food insecurity, Ethiopia (ranking no.1) is the worst of all African countries as 32 .9 million people are suffering from chronic undernourishment and food insecurity. Which means Ethiopia  has one of the highest levels of food insecurity in the world, in which more than 35%  of its total population is chronically undernourished.

Ethiopia  is one of the poorest countries in the world, ranking 173 of the 187 countries in the 2013 Human Development Index.See @ http://en.wikipedia.org/wiki/List_of_countries_by_Human_Development_Index

 

 

FAO in its key findings reports that:  overall, the results confirm that developing countries have made significant progress in improving food security and nutrition, but that progress has been uneven across both regions and food security dimensions. Food availability remains a major element of food insecurity in the poorer regions of the world, notably sub-Saharan Africa and parts of Southern Asia, where progress has been relatively limited. Access to food has improved fast and significantly in countries that have experienced rapid overall economic progress, notably in Eastern and South-Eastern Asia.Access has also improved in Southern Asia and Latin America, but only in countries with adequate safety nets and other forms of social protection. By contrast, access is still a challenge in Sub Saharan Africa, where income growth has been sluggish, poverty rates have remained high  and rural infrastructure remains limited and has often deteriorated.

 

According to the new report, many developing countries have made significant progress in improving food security and nutrition, but this progress has been uneven across both regions and dimensions of food security. Large  challenges remain in the area of food utilization. Despite considerable improvements over the last two decades, stunting, underweight and micronutrient deficiencies remain stubbornly high, even where availability and access no longer pose problems. At the same time, access to food remains an important challenge for many developing countries, even if significant progress has been made over the last two decades, due to income growth and poverty reduction in many countries.Food availability has also improved considerably over the past two decades, with more food available than ever and international food price volatility before. This increase is reflected in the improved adequacy of dietary energy and higher average supplies of protein. Of the four dimensions, the least progress has been made in stability, reflecting the effects of growing political instability.Overall, the analyses reveal positive trends, but it also masks important divergences across various sub- regions. The  two sub- regions that have made the least headway are sub-Saharan Africa and Southern Asia, with almost all indicators still pointing to low levels of food security.On the other hand, Eastern (including South Eastern) Asia and Latin America have made the most progress in improving food security, with Eastern Asia experiencing rapid progress on all four dimensions over the past two decades.The greatest food security challenges overall remain in sub-Saharan Africa, which has seen particularly slow progress in improving access to food, with sluggish income growth, high poverty rates and poor infrastructure, which hampers physical and distributional access. Food availability remains low, even though energy and protein supplies have improved. Food utilization remains a major concern, as indicated by the high anthropometric prevalence of stunted and underweight children under five years of age. Limited progress has been made in improving access to safe drinking-water and providing adequate sanitation facilities, while the region continues to face challenges in improving dietary quality and diversity, particularly for the poor. The stability of food supplies has deteriorated, mainly owing to political instability, war and civil strife.

 

 

Prevalence of undernourishment in Africa/ #Ethiopia

Summary of Africa Scorecard on Number of People in State of Undernourishment / Hunger Country Name  and Number of People in State of Undernourishment / Hunger (2012-2014, Millions):- 

1st  Ethiopia  ( 32.9 million)

2nd Tanzania (17.0)

3 Nigeria (11.2)

4 Kenya (10.8)

5 Uganda (9.7)

6 Mozambique (7.2)

7 Zambia (7.0)

8 Madagascar (7.0)

9 Chad (4.5)

10 Zimbabwe (4.5)

11 Rwanda (4.0)

12 Angola (3.9)

13 Malawi (3.6)

14 Burkina Faso (3.5)

15 Ivory Coast (3.0)

16 Senegal (2.4)

17 Cameroon (2.3)

18 Guinea (2.1)

19 Algeria (2.1)

20 Niger 2.0

21 Central Africa Republic (1.7)

22 Sierra Leone (1.6)

23 Morocco (1.5)

24 Benin (1.0)

25 Togo (1.0)

26 Namibia (.9)

27 Botswana (.05)

28 Guinea Bissau (.03)

29 Swaziland (.03)

30 Djibouti (.02)

31. Lesotho (.02)

Data for South Africa, Sao Tome and Principal, Gabon,  Ghana, Mali, Tunisia, Mauritius and Egypt indicate that Prevalence of undernourishment is insignificant or under .01 million. There are no reported data for  some countries such as Libya, Sudan, Eritrea, Somalia, Burundi and Gambia.

Read  more @ The State of Food Insecurity in the World Strengthening the enabling environment
for food security and nutrition http://www.fao.org/3/a-i4030e.pdf

 

 

Attention to Ethiopia (Africa): Corruption ‘impoverishes and kills millions’ September 4, 2014

Posted by OromianEconomist in Africa, Africa and debt, Africa Rising, African Poor, Colonizing Structure, Corruption, Dictatorship, Ethiopia's Colonizing Structure and the Development Problems of People of Oromia, Afar, Ogaden, Sidama, Southern Ethiopia and the Omo Valley, Illicit financial outflows from Ethiopia, The Tyranny of Ethiopia, Undemocratic governance in Africa, Youth Unemployment.
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Corruption ‘impoverishes and kills millions’

 

Pile of dollars (file picture)
BBC (4 September 2014) The ONE group says money lost because of corruption would otherwise be spent on school and medicine. An estimated $1tn (£600bn) a year is being taken out of poor countries and millions of lives are lost because of corruption, according to campaigners.A report by the anti-poverty organisation One says much of the progress made over the past two decades in tackling extreme poverty has been put at risk by corruption and crime.

Corrupt activities include the use of phantom firms and money laundering. The report blames corruption for 3.6 million deaths every year.

If action were taken to end secrecy that allows corruption to thrive – and if the recovered revenues were invested in health – the group calculates that many deaths could be prevented in low-income countries.

Corruption is overshadowing natural disasters and disease as the scourge of poor countries, the report says.

One describes its findings as a “trillion dollar scandal”.

“Corruption inhibits private investment, reduces economic growth, increases the cost of doing business and can lead to political instability,” the report says.

“But in developing countries, corruption is a killer. When governments are deprived of their own resources to invest in health care, food security or essential infrastructure, it costs lives and the biggest toll is on children.”

The report says that if corruption was eradicated in sub-Saharan Africa:

  • Education would be provided to an additional 10 million children per year
  • Money would be available to pay for an additional 500,000 primary school teachers
  • Antiretroviral drugs for more than 11 million people with HIV/Aids would be provided

One is urging G-20 leaders meeting in Australia in November to take various measures to tackle the problem including making information public about who owns companies and trusts to prevent them being used to launder money and conceal the identity of criminals.

It is advocating the introduction of mandatory reporting laws for the oil, gas and mining sectors so that countries’ natural resources “are not effectively stolen from the people living above them”.

It is recommending action against tax evaders “so that developing countries have the information they need to collect the taxes they are due” and more open government so that people can hold authorities accountable for the delivery of essential services.

Read more @ original source:

http://www.bbc.co.uk/news/world-africa-29049324

http://www.bbc.co.uk/news/world-29040793

The statement ‘seven out of ten fastest growing economies are in Africa’ carries no real meaning. To utter it is merely stating that you subscribe to the hype August 26, 2014

Posted by OromianEconomist in Africa, Africa and debt, Africa Rising, African Poor, Aid to Africa, Development & Change, Ethiopia's Colonizing Structure and the Development Problems of People of Oromia, Free development vs authoritarian model, Illicit financial outflows from Ethiopia, Land Grabs in Africa, Poverty, The extents and dimensions of poverty in Ethiopia, UN's New Sustainable Development Goals, Undemocratic governance in Africa, Youth Unemployment.
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‘Most of the time we simply do not know enough to assert accurate growth rates. There are also known biases and manipulations. Ethiopia, for example, is notable for having long-standing disagreements with the IMF regarding their growth rates. Whereas the official numbers have been quoted in double digits for the past decade, a thorough analysis suggested the actual growth rates were around 5 to 6 percent per annum. More generally, one study used satellite imaging of nighttime lights to calculate alternative growth rates, and found that authoritarian regimes overstate reported rates of growth by about 0.5 to 1.5 percentage points. Another recent study argues that inflation is systematically understated in African countries – which in turn means that growth and poverty reduction is overstated.’
http://africanarguments.org/2014/08/26/why-saying-seven-out-of-ten-fastest-growing-economies-are-in-africa-carries-no-real-meaning-by-morten-jerven/

Why saying ‘seven out of ten fastest growing economies are in Africa’ carries no real meaning

By Morten Jerven @ AfricanArguments
Before, during and after the US Africa summit one of the most frequently repeated factoids supporting the Africa Rising meme was that ‘seven out of ten fastest growing economies are in Africa.’ In reality this is both a far less accurate and much less impressive statistic than it sounds. More generally, narratives on African economic development tend to be loosely connected to facts, and instead are driven more by hype.

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The ‘seven out of ten’ meme derives from a data exercise done in 2011 by The Economist. The exercise excluded countries with a population of less than 10 million and also the post-conflict booming Iraq and Afghanistan. This left 81 countries, 28 of them in Africa (more than 3 out of 10) and, if you take out the OECD countries from the sample, (which are unlikely to grow at more than 7 percent per annum), you find that every second economy in the sample is in Africa. It might not give the same rhetorical effect to say: ‘on average some African economies are expected to grow slightly faster than other non-OECD countries,’ but that would be more accurate.

And before we literally get ahead of ourselves (The Economist was reporting forecasts made for 2011 to 2015) there is a difference between forecasted and actually measured growth. According to John Kenneth Galbraith, the only function of economic forecasting is to make astrology look respectable. So how good is the IMF at forecasting growth in Low Income Countries?

According to their own evaluation, IMF forecasts “over-predicted GDP growth and under-predicted inflation.” Another study looked at the difference between the forecasts and the subsequent growth revisions in low income countries, and found that “output data revisions in low-income countries are, on average, larger than in other countries, and that they are much more optimistic.” Forecasts are systematically optimistic all over the world, but in Low Income Countries even more so.

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Among those on the list of the fastest growers were countries like Nigeria, Ghana and Ethiopia. The news that both Nigerian and Ghanaian GDP doubled following the introduction of new benchmark years for estimating GDP in 2010 and 2014 should remind us that the pinpoint accuracy of these growth estimates is lacking. How confident should you be about a 7 percent growth rate when 50 percent of the economy is missing in the official baseline? Recent growth in countries with outdated base years is also overstated.

While Ghana has reportedly had the highest growth rates in the world over the past years, a peer review of the Ghana national accounts noted that “neither a national census of agriculture nor other surveys, such as a crop and live-stock survey, have been conducted…there is no survey to provide benchmark data for construction, domestic trade and services.” It was recently reported that an economic census is being planned for next year. What we do know is that Ghana (together with Zambia, another of the projected ‘top ten growers’) has returned to the IMF to seek assistance following their entry into international lending markets.

Most of the time we simply do not know enough to assert accurate growth rates. There are also known biases and manipulations. Ethiopia, for example, is notable for having long-standing disagreements with the IMF regarding their growth rates. Whereas the official numbers have been quoted in double digits for the past decade, a thorough analysis suggested the actual growth rates were around 5 to 6 percent per annum. More generally, one study used satellite imaging of nighttime lights to calculate alternative growth rates, and found that authoritarian regimes overstate reported rates of growth by about 0.5 to 1.5 percentage points. Another recent study argues that inflation is systematically understated in African countries – which in turn means that growth and poverty reduction is overstated.

***

Data bias is carried across from economic growth to other metrics. The pressure on scholars, journalists and other commentators to say something general about ‘Africa’ is relentless, and so the general rule is to oblige willingly. When talking about average trends in African politics and opinion, analysis is influence by the availability of survey data, such as Afrobarometer, and the data availability is biased. According to Kim Yi Donne, on The Washington Post’s ‘Monkey Cage’ blog, of the 15 African countries with the lowest Polity IV rankings, only seven have ever been included in the Afrobarometer, whereas all but one African country rated as a democracy by the same index is included.

Any quantitative study which says something about the relationship between growth and trends in inequality and poverty, relies on the availability of household survey data. One paper boldly stated that African Poverty is Falling…Much Faster than You Think! The data basis was very sparse and unevenly distributed. There were no data points for Angola, Congo, Comoros, Cape Verde, D.R. Congo, Eritrea, Equatorial Guinea, Seychelles, Togo, Sao Tome and Principe, Chad, Liberia, and Sudan. In addition, six countries only have one survey. The database included no observations since 2004 – so the trend in poverty was based entirely on conjecture. Famously you need at least two data points to draw a line. Yet the study included a graph of poverty lines in the Democratic Republic of Congo from 1970 to 2006 – based on zero data points.

A result of doubts about the accuracy of the official evidence, and a dearth of evidence on income distributions, scholars have turned to other measurements. Data on access to education and ownership of goods such as television sets from Demographic and Health Surveys were used to compile new asset indices. In turn, these data were used to proxy economic growth and in place of having a measure of the middle class. In both cases the data may paint a misleadingly positive picture. While claiming to describe all of Africa over the past two decades, these surveys are only available for some countries sometimes.

***

The statement ‘seven out of ten fastest growing economies are in Africa’ carries no real meaning. To utter it is merely stating that you subscribe to the hype. It is particularly frustrating, and it surely stands in way of objective evaluation, that the narratives in African Economic Development switches from one extreme to the other so swiftly. The truth lies somewhere between the ‘miracles’ and ‘tragedies’. It is nothing short of stunning that in a matter of 3-4 years the most famous phrase relating to African economies has turned from ‘Bottom Billion’ to ‘Africa Rising’.

Because of a lack of awareness on historical data on economic growth it was long claimed that Africa was suffering “a chronic failure of growth”, but growth is not new to the African economies, growth has been recurring. There is no doubt that there are more goods leaving and entering the African continent today than fifteen years ago. More roads and hotels are being built and more capital is flowing in and out of the African continent than before. But what is the real pace of economic growth? Does the increase in the volume of transaction result in a sustained increase in living standards? The evidence does not yet readily provide us with an answer. It is the job of scholars to give tempered assessments that navigate between what is make-believe and what passes as plausible evidence.

Morten Jerven is Associate Professor at the Simon Fraser University, School for International Studies. His book Poor Numbers: how we are misled by African development statistics and what to do about it is published by Cornell University Press. @MJerven

http://africanarguments.org/2014/08/26/why-saying-seven-out-of-ten-fastest-growing-economies-are-in-africa-carries-no-real-meaning-by-morten-jerven/

Related References:

 

Why Africa needs a data revolution

 

Since the term “data revolution” was introduced, there has been a flurry of activity to define, develop, and implement an agenda to transform the collection, use, and distribution of development statistics. That makes sense. Assessing the international community’s next development agenda, regardless of its details, will be impossible without accurate data.

Yet, in Sub-Saharan Africa – the region with the most potential for progress under the forthcoming Sustainable Development Goals – accurate data are severely lacking. From 1990 to 2009, only one Sub-Saharan country had data on all 12 indicators established in 2000 by the Millennium Development Goals. Indeed, of the 60 countries with complete vital statistics, not one is in Africa. While most African countries have likely experienced economic growth during the last decade, the accuracy of the data on which growth estimates are based – not to mention data on inflation, food production, education, and vaccination rates – remains far from adequate.

Inaccurate data can have serious consequences. Consider Nigeria’s experience earlier this year, when GDP rebasing showed that the economy was nearly 90% larger than previously thought. The distorted picture of Nigeria’s economy provided by the previous statistics likely led to misguided decisions regarding private investment, credit ratings, and taxation. Moreover, it meant that Nigeria was allocated more international aid than it merited – aid that could have gone to needier countries.

Contrary to popular belief, the constraints on the production and use of basic data stem not from a shortage of technical capacity and knowhow, but from underlying political and systemic challenges. For starters, national statistical offices often lack the institutional autonomy needed to protect the integrity of data, production of which thus tends to be influenced by political forces and special interest groups.

Poorly designed policies also undermine the accuracy of data. For example, governments and donors sometimes tie funding to self-reported measures, which creates incentives for recipients to over-report key data like vaccination or school-enrollment rates. Without effective oversight, these well-intentioned efforts to reward progress can go awry.

Despite these failings, national governments and international donors continue to devote far too few resources to ensuring the collection of adequate data. Only 2% of official development aid is earmarked for improving the quality of statistics – an amount wholly insufficient to assess accurately the impact of the other 98% of aid. And governments’ dependency on donors to fund and gather their core statistics is unsustainable.

In fact, stronger national statistical systems are the first step toward improving the accuracy, timeliness, and availability of the data that are essential to calculating almost any major economic or social-welfare indicator. These include statistics on births and deaths; growth and poverty; tax and trade; health, education, and safety; and land and the environment.

Developing such systems is an ambitious but achievable goal. All that is needed is a willingness to experiment with new approaches to collecting, using, and sharing data.

This is where the public comes in. If private firms, media, and civil-society organizations identify specific problems and call publicly for change, their governments will feel pressure to take the steps needed to produce accurate, unbiased data – for example, by enhancing the autonomy of national statistical offices or providing sufficient funds to hire more qualified personnel. While it may be tempting to bypass government and hope for an easy technology-based solution, sustainable, credible progress will be difficult without public-sector involvement.

The recognition by governments and external donors of the need for more – and more efficient – funding, particularly to national statistical systems, will be integral to such a shift. Establishing stronger incentives for agencies to produce good data – that is, data that are accurate, timely, relevant, and readily available – would also help, with clearly delineated metrics defining what qualifies as “good.” In fact, tying progress on those metrics to funding via pay-for-performance agreements could improve development outcomes considerably.

One concrete strategy to achieve these goals would be to create a country-donor compact for better data.

Read more @ http://forumblog.org/2014/08/africas-necessary-data-revolution/?utm_content=buffer4f4fd&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer

 

Government media in Ethiopia vs Scholars view of development: A stand-off paradox August 22, 2014

Posted by OromianEconomist in Africa, Africa Rising, Colonizing Structure, Development & Change, Ethiopia's Colonizing Structure and the Development Problems of People of Oromia, Ethiopia's Colonizing Structure and the Development Problems of People of Oromia, Afar, Ogaden, Sidama, Southern Ethiopia and the Omo Valley, Free development vs authoritarian model, Illicit financial outflows from Ethiopia, Janjaweed Style Liyu Police of Ethiopia, Jen & Josh (Ijoollee Amboo), Knowledge and the Colonizing Structure., Land Grabs in Oromia, Youth Unemployment.
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Government  media in Ethiopia vs Scholars view of development: A stand-off paradox

Ameyu Etana*

 

 

 

 

 

It has been more than a decade since DEVELOPMENT became a buzzword in Ethiopian Radio  and Television Agency. As ERTA is a pro-government media and  sponsored by the state, there is a strong probability to be under the guise of social responsibility theory when addressing issues. As it is common of using development journalism as an instrument in developmental states, likewise, the Ethiopian government is using media as a big power to making the public participating in development.  Television Agency (ERTA) and other media that are pro-government but run under the auspices of private media. Regrettably, probably, it is the most abused and corrupted word beyond what one could imagine. A name developmentalist came to develop a negative connotation for a journalist in Ethiopia. Quite number of academic researches has been done on the single nationwide media in Ethiopia, however; very little of them adduced and proved the professional nature of political power house of Ethiopian government, ERTA.

Ethiopia, a nation came to be a laboratory of political economy is a dish for choose and pick philosophy of politics. The political economy of Ethiopia is democratic developmental state. By their nature such states are repressive. And there has never been a country both democratic and developmental at a time except Ethiopia. Nevertheless, it seems, what we are seeing is not in accord with the political economy.

The Ethiopian government adopted United Nations General Assembly Resolution 41/128:1986. Alike, the right to development is one of the bill rights that had been included in the federal constitution of Ethiopia. Article 43 of FDRE constitution could depict this. To the contrary, mostly, what has been written and what has been practiced seems contradict each other.

As we know, what Ethiopian Television, Ethiopian Radio, Ethiopian Herald, Addis Zemen, Bariisaa, Ethiopian News Agency, Walta Information Center and other government driven media and/or news agency in Ethiopia and other whose names called under the guise of private but pro-government media view development as econometric (statistics use to view development e.g. economic development) view of development. As a result, any report that put Ethiopian development in number presumed to have high political benefit and get the major attention as it makes a headline. Infrastructure, number of investors, their capital, the KM of a road built, export and import quantities, number of graduates, number of higher institutions, and others are mostly at the desk of those media institution. Hence, what is seen is not the human side but the growth side as it uses to be.

Since the philosophy of state media in Ethiopia is development journalism, though wrongly interpreted, the issue of development vastly and exhaustively reported in a form of news, program, documentary, and other types of reports. However, most news are just a report as they lack interpretation while the journalist acts as a conduit than the one who produce it. I.e. Ethiopia is amongst the fastest growing economy in the world though third of its population lives in absolute poverty. In addition, there is been a big unequal economic distribution in the country and unemployment is getting higher albeit it is repeatedly told it is non-oil economy. If so, what is the benefit of jobless growth? Moreover, indigenous knowledge is ignored at the same time modern technology is also getting little attention by farmers, which is discrepancy right now in the country. As the journalism model, those media were supposed to critically examine and meticulously analyze issue that matters most to the people than merely reporting it.

The people of the country have long experienced the use of development for propaganda. Owing to this, it is difficult to identify the real concept of development in the mind of citizens. This resembles the sedative nature of the media in the country. Recently, journalists of Oromia Radio and Television Journalists (ORTO) did a deliberation on the controversial master plan of Addis Ababa, however, regrettably, they got an axe for the mere fact they did speak their mind. Hence, we can say that development is like politics in Ethiopia as it is untouched area to be opened for deliberation.

After all what is development? What scholars say about development? 

Several scholars held a debate for decades on what development is until they came to, probably; seems agree as it is all about human development. Lamentably, as Rita Abrahamsen puts it in her book called Disciplining Democracy: Development Discourse and Good Governance in Africa the issue of development became politicized, which is unfortunate as the world came to see help poor countries based on their political ideology they might have than favoring solely for being human.

The leading professor Amartya Sen in his book Development as Freedom which was published in 1999 argues development should be seen as a process of expanding the real freedoms that people enjoy. He contrasts the view of development with the widely prevalent concentration on the expansion of real income and on economic growth as the characteristics of successful development. Poverty, the flip side of development, means capability deprivation that inhibits citizen’s freedom to live, the reason they value most. As a result, development means an expansion of freedom.

For Amartya Sen Poverty is lack of choice, socioeconomic and political deprivation while development is a freedom or emancipation from poverty, empowerment of the people. Therefore, we simply understand us development is all about a people than merely numbers.

Similarly Michael Todaro in his book Economic Development argues that development must be seen as multidimensional process involving major changes in social structure, popular attitudes, and national institutions as well as the acceleration of economic growth, the reduction of inequality and the eradication of absolute poverty. And several scholars including Thomas Alan and others believed development is about empowering and emancipating people from the agony that make them suffer most than ignoring their existence.

Having looked at this, inopportunely we see the paradox in Ethiopia. In the name of development people has been ignored freedom; few are benefiting but millions are joining poverty if not struggling to survive. Rather than sensitizing them the media is pursuing sedative under the auspices of development as submissive people at large are being produced in the country seeing that the issue of development became not open for discussion and untouchable. Regrettably, in the name of investment and several projects, millions are being displaced from the land they presumes their only property they got from their forefathers but, are treated like ignorant who could serve nothing for the development. I.e. it is the residents of Addis Ababa that were deliberating over the contentious master plan for days on the lands of farmers surrounding Addis Ababa. How could this be the right way? By no means it is democratic or developmental? It is highly nonsense and absurd but not surprise as it uses to be in the country.

If development is for the people why do ignore them or why to treating them as against development? By its nature development is not merely road or building, it is about mind development. If the big asset for human, which is mind is not well set, how to manage the entire infrastructure? It seems everything is messed up in Ethiopia. Due to this, the wider public is feeling ignorant to the plans and strategies the government drafts each time.

Consequently, here in Ethiopia, under the guise of development thousands get prisoned, displaced, ignored, dehumanized, unnerved, denied capability, bottled in poverty, whereas, few get rich, empowered, emancipate in such a way to fasten andwiden the gap of living standards of citizens, which is shockingly inhuman. Inconveniently, for the development gained it is not the people but a party or officials get recognition as personal cult is common so far.

The other vital issue we should pay attention to is making the people the participant when the plan is drafted which mean making the people the source of development. If doing so, those who decide by themselves become responsible for the accomplishment, which is a big benefit for the ruled and for the ruler. However, this was not happening rather the people are assumed as ignorant mass that could have no role prior to drafting of the plan but after. http://mohiboni.blogspot.co.uk/2014/08/government-herd-media-in-ethiopia-and.html

*Ameyu Etana is a journalist in Ethiopia and by now he is a graduate student at Addis Ababa University. Can be reached at: ameyuetana@gmail.com  You can follow and comment on his articles on mohiboni.blogspot.com and mohiboni.wordpress.com. All are encouraged to challenge. Any idea is welcomed as far as it has adduced. 

 

Africa’s Jobless Growth: Economic success just for a few cannot be a replacement for human rights or participation, or democracy August 18, 2014

Posted by OromianEconomist in Africa, Africa Rising, African Poor, Aid to Africa, Development & Change, Dictatorship, Ethiopia's Colonizing Structure and the Development Problems of People of Oromia, Illicit financial outflows from Ethiopia, Youth Unemployment.
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Africa is Rising! At Least Its 1% Is

Africa’s economy may be booming, but this will do little to help unemployment and poverty if growth is jobless and its spoils are limited to the few.

What we need in Africa is balanced development. Economic success cannot be a replacement for human rights or participation, or democracy … it doesn’t work…it worries us a lot when we don’t see the trickle-through factor, when gain goes to the top 1% or 2%, leaving the rest behind.” – Mo Ibrahim October 15, 2012

It did not come as a surprise to many when, on October 15, the Mo Ibrahim Foundation announced that there was no winner for its annual $5 million African leadership award – for the third time since its inception in 2006. What was surprising, however, was that the foundation’s chair, British-Sudanese billionaire Mo Ibrahim, alsoadmonished the much-celebrated recent economic ‘success’ of the African continent for largely failing to translate into better human rights and social development, and for essentially creating a few elitist winners at the top whilst the rest were left struggling at the very bottom.

Recent reports, forecasts and editorials of influential financial magazines are incredibly optimisticabout Africa – its booming economic growth, its investment opportunities and its growing middle-class. Sub-Saharan African countries are reportedly among the fastest growing in the world with six out of ten world’s fastest growing economies, and recording growth rates averaging 4.9%, higher than the developing country average and much higher than the developed country average.

The Economist’s December 2011 print issue was boldly titled ‘Africa Rises’ and in August 2012, it again boldly proclaimed that ‘A Continent Goes Shopping’, underscoring the voracious purchasing power of the African middle-class to buy consumer and even luxury goods. The current received wisdom in these sleek reports, glossy magazine pages and glass-panelled conference rooms is that sub-Saharan Africa really is the place to be and to invest in, with all its abundant opportunities.

Jobless growth

This much-trumpeted economic success is mostly true, until one looks at the other side. Then questions arise over to what extent growth is spread across sectors of the economy, and whether such economic growth is translating into corresponding improvements in human and social development.

It is common knowledge that this new dawn of booming economic growth is largely the consequence of the recent rise in the global commodity prices of natural resources, chiefly oil, while the vibrancy of other sectors of the economy such as banking, telecommunications and construction trail behind in terms of growth. Many African countries primarily depend on the exportation of natural resources – and industry which is highly capital- (and technology-) intensive, providing few jobs. Only five of Africa’s fifty-four countries are currently not “either producing or looking for oil”.

It is therefore no surprise that many African countries, especially the economic powerhouses of the continent, are bedevilled by high unemployment, particularly amongst young people – hovering at25% in Egypt, 48% in South Africa and 42% in Nigeria. Thus, growth in capital-intensive sectors – such as resource exports, banking, and telecommunications – is barely trickling down to create jobs and economic opportunities for the vast majority of the people – a phenomenon commonly known as ‘jobless growth’.

Many sub-Saharan African countries experiencing record-level economic growth still have low rankings in human development indices, despite marginal improvements in education enrolment and, with countrywide variations, maternal health. This contradiction is further reinforced by the growing inequality that characterises many of such African ‘powerhouses’. Luanda in Angola (thanks to flowing petro-dollars) and N’Djamena in Chad were, respectively, the second and eighth most expensive cities to live as an expatriate in 2012 – ahead of Sydney, London and New York according to Mercer’s Cost of Living Survey. Juba in the newly independent South Sudan is also gaining notoriety for its high cost of living, while the price of select real estate in Abuja and Lagos in Nigeria reportedly rivals that of some Western cities. These expensive cities are in countries grouped within the ‘Low Human Development’ category of the United Nation’s Human Development Index based on indicators such as health, income and education.

A tale of two cities

There has certainly been some improvement – for one, there is now an identifiable middle-class in Africa with money to splash around in the cinemas of Abuja and pricey hotels of Accra, the malls and retail outlets of Johannesburg and the exclusive residential estates of Lagos and Nairobi. However, once you step out of these glitzy inner cities and look to the outskirts, the glaring contrast between the shiny modernity and the urban deprivation in the slums hits you like the searing tropical sun.

 

The task thus remains for governments to devise sustainable development strategies that are tailored specifically to suit the African context. Such strategies must sustain the momentum of economic growth while ensuring that growth spreads to and strengthens sectors such as mechanised agriculture, light manufacturing and small-scale enterprises, which have a direct impact on the lives and incomes of citizens.

Such transformational policies should ensure that revenue windfalls are utilised wisely towards social and welfare policies, which will empower millions of Africans out of poverty, thereby creating a robust middle-class rather than just enriching an already existing sliver. It also means that such funds can be saved to help with later needs, as with the Sovereign Wealth Fund embarked on by countries such as Angola and the new oil-producer Ghana.

Importantly, the African youth bulge needs to be transformed into a demographic dividend by providing employment and economic opportunities to an increasingly educated African youth and by providing critically needed infrastructure so that abundant innovative ideas, which are capable of transforming lives and societies, can materialise into reality.

Ultimately, these are still governance challenges that Africa has a long way go to overcome, but the marginal improvements in some aspects of governance, especially women’s rights, as the Mo Ibrahim Foundation’s Index has shown, gives room for some cautious optimism. Mo Ibrahim’s admonishment could not have come at a better time.

Read @ it original source:http://thinkafricapress.com/development/mo-ibrahim-issues-timely-caution-afro-optimists?utm_content=buffer46624&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer

 

*Zainab Usman is a Nigerian freelance writer. She is currently a DPhil candidate at the University of Oxford in Governance and Political Economy of Economic Diversification in Sub-Saharan Africa. She has a BSc in International Studies from Ahmadu Bello University Zaria and a Masters in International Political Economy and Development from the University of Birmingham. Zainab is an advocate of good governance, poverty reduction and women and youth empowerment. She regularly blogs atzainabusman.wordpress.com.

Ethiopia’s capital flight is estimated at US$24.9 billion or 83.8% of the GDP August 18, 2014

Posted by OromianEconomist in Africa, Africa and debt, Africa Rising, Ethiopia & World Press Index 2014, Ethiopia's Colonizing Structure and the Development Problems of People of Oromia, Illicit financial outflows from Ethiopia, The Colonizing Structure & The Development Problems of Oromia, The extents and dimensions of poverty in Ethiopia, The Tyranny of Ethiopia, Tyranny, UK Aid Should Respect Rights, US-Africa Summit.
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The term capital flight has been given many interpretations in the economic literature and in the  press, leading to confusion and misinterpretations. In the popular press, capital flight is presented as illegal or illicit financial flows. It is housed in the same domain as money laundering, tax  evasion, transfer pricing, underground trafficking. Yet, while these activities are illicit, not all of  them amount to capital flight. At the same time, while most capital flight may be deemed illicit. Capital flight may be illicit in one of three ways: when it consists of money acquired illegally and transferred  abroad; when funds are transferred abroad illicitly by violating capital account regulations; when capital is hidden abroad and therefore not being subject to taxation and other government regulations. It is not possible to make this determination a priori from the data that is used to calculate capital flight, which involves a reconciliation of recorded capital inflows (mainly external borrowing and foreign direct investment) and the use of these resources (to cover the current account deficit and accumulation of reserves). The term capital flight means capital flows from a country that are not recorded in the country’s Balance of Payments (BoP). If all the ransactions were correctly and systematically recorded, inflows would balance out with outflows, except for small and random statistical errors as recorded in the ‘net errors and omissions’ line of the BoP. Where large discrepancies are observed, in other words, where there is  substantial ‘missing money’ in the BoP, this is taken as an indication of the presence of capital  flight.

 http://www.peri.umass.edu/fileadmin/pdf/working_papers/working_papers_351-400/WP353.pdf

Ethiopia’s capital flight is estimated at US$24.9 billion or 83.8% of the GDP

 

capital_flight

(Source: Political Economy Research Institute, the University of Massachusetts).

 

 

August 17, 2014 (PERI Research) — Ethiopia’s capital flight is estimated at about US$24.9 billion which is 83.8% of the country’s Gross Domestic Product (GDP). Ethiopia is ranked 8th in the group of 33 countries for which data are available but it stands first when compared to non-oil and/or mineral exporting countries. Even the latter was considered to be substantially lower than the actual flows give that large stock of immigrants. The true figure could be as high as one billion dollars. If so, Ethiopian capital flight would be commensurately larger than the estimated.

 

Capital losses through trade misinvoicing and unrecorded remittance
Substantial export underinvoicning (net outflows) couple with import underinvoicing (net inflows), with the balance resulting in a net outflow, as in the case of Sudan or a net inflow, as in the cases of Ethiopia and Ghana.

Unrecoreded remittances also contribute substantially to estimated capital flight in some countries. In Ethiopia, the volume of remittances reported by the World Bank in 2010 was about half the amount reported by the Central Bank ($661 million).

The following figures are in millions

capital_flight3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Source: Political Economy Research Institute, the University of Massachusetts).

http://ayyaantuu.com/horn-of-africa-news/ethiopias-capital-flight-is-estimated-at-us24-9-billion-or-83-8-of-the-gdp/

http://www.peri.umass.edu/fileadmin/pdf/ADP/SSAfrica_capitalflight_Oct23_2012.pdf

http://concernedafricascholars.org/bulletin/issue87/asiedu/