(CNN) Katanga
province in the Democratic Republic of Congo is blessed with enormous
natural wealth, including vast deposits of precious minerals such as
diamonds, gold, and tantalum.
Katanga
saw a spectacular mining boom around the turn of the century, when
President Laurent-Desire Kabila and then his son Joseph licensed
international mining companies to tap its treasures.
This
arrangement generated riches for the Congolese elite, and vastly more
for the prospectors, but offered little to the poverty-ravaged
population. From 1999 to 2002, the Kabila regime "transferred ownership
of at least $5 billion of assets from the state-mining sector to private
companies under its control... with no compensation or benefit for the
State treasury," a United Nations investigation found.
The
bonanza coincided with a ruthless crackdown on dissent. In 2004, a
small, mostly civilian group took over a mine operated by the Australian
firm Anvil Mining in Kilwa village, protesting that the company was
making huge profits without rewarding the local workforce.
According to a UN report, the Congolese army crushed the uprising and killed around 100 people, many by summary execution.
Workers extracting cobalt from a lake in Katanga province, DR Congo.
Modern colonialism
The combination of staggering wealth, rampant violence, and abject poverty
in DR Congo is no coincidence, but part of a pattern causing
devastation across Africa, according to Financial Times investigative
journalist Tom Burgis.
In a new edition of his book The Looting Machine, the author probes the paradox of "the continent that is at once the world's poorest and, arguably, its richest."
Burgis,
a former correspondent in Lagos and Johannesburg, finds a wide variety
of kleptocrats and rackets over his travels through dozens of
resource-rich countries. But a common thread is that the wholesale
expropriation of resources during colonial times has barely slowed
through the post-independence era, albeit with new beneficiaries.
"Western
governments are not supposed to wield commercial and political power at
the same time, and certainly not to use one to benefit the other," says
Burgis. "In colonial states...The British or Portugese would cultivate a
small group of local people who would fuse political and commercial
power to control the economy."
"When
the foreign power leaves, you are left with an elite that has no
division between political and commercial power. The only source of
wealth is mines or oilfields, and that is a recipe for ultra-corrupt
states. Somewhere like Nigeria, an 'extractor elite'...wanted to draw to
itself the rent that oil and mining resources generate."
Burgis cites another colonial hangover in the continued presence and power of oil and mining firms.
"The
multinational companies hold enormous economic and political power in
post-independence African countries," he says. "In this way, there is a
pretty straight line from colonial exploitation to modern exploitation."
British
businessman Cecil Rhodes (center) founded the De Beers diamond company
in South Africa, implicated in colonial atrocities.
Fueling oppression
The
ability of governments to rely on resource revenue leads to corruption
and oppression, Burgis argues, as they are not accountable to their
people through a social contract based on taxation and representation.
He cites Angola, which earns almost half of its GDP from oil, as an example of government as "a service for the elite." A 2011 IMF audit revealed that $32 billion disappeared from official accounts between 2007 and 2010, a quarter of the state's income.
The
Angolan elite rejects accountability and does not tolerate any
challenge from the public, Burgis adds, recalling the recent case of
activists being jailed for a public reading of a pro-democracy book.
"Government can behave that way if it doesn't need the consent of its people," the author says.
Angola has taken steps to address such criticism in recent years, with the 2012 election deemed "generally free and fair" by neutral observers. But human rights groups attest that oppression remains a fact of life.
Garbage piles up as so little of Angola's wealth trickles down to the communities.
Secret deals
The
growth of offshore banking in the late 20th century created new
opportunities for resource tycoons to cover their tracks, a practice
laid bare in the Panama Papers.
Israeli
businessman Dan Gertler was an early pioneer. After forging a close
friendship with DR Congo President Joseph Kabila, he was granted a near
monopoly on exporting the nation's diamonds, and quickly became a
billionaire. Gertler routed the cash through an elaborate network of
offshore accounts in tax havens, keeping the details of controversial deals secret.
"In
the case of African resource deals, offshore funds have been shown to
conceal questionable transactions," says Burgis. "In the 1980s, bribes
were literally cars full of cash and you handed the key to the official
you were trying to bribe."
"Bribery
now is much more sophisticated, and has become harder to define as
bribery if it's (through) offshore transactions or people being given
equity shares in offshore companies...You have to crack open a lot of
offshore secrecy to see the conflict of interest that lies at the heart
of them."
The era of global finance
has opened African markets to a new generation of mysterious traders.
Burgis spent years on the trail of elusive Chinese businessman Sam Pa,
who has cycled through multiple aliases while making deals across the
continent from Angolan oil to Zimbabwean diamonds. Pa is believed to
lead the secretive Queensway investor group, and Burgis claims he has represented the Chinese state, although the government denies this.
China's President Xi Jinping shakes hands with Zimbabwe's President Robert Mugabe in Harare
Breaking the chain
Burgis is skeptical that resource industries can ever be reformed.
"There
is a troubling possibility that it's not possible to put natural
resources in these countries to work for the common good," says Burgess.
"(Almost) everywhere that receives a significant share of its income
from oil or mining is badly run and often violent -- it's in the nature
of these industries to cause these problems."
Botswana
and South Africa have befitted from moving up the value chain --
developing high-skilled industries from natural resources rather than
just exporting raw materials, such as diamond polishing or manufacturing
metallic goods. Burgis believes that diversifying economies away from a
single resource -- as President Buhari's government in Nigeria is
attempting to do -- can mitigate the effects of dependency.
He
suggests another option is to keep resources in the country and
implement high tariffs to protect domestic industries, but African
leaders have been reluctant to adopt such measures.
"We
have a world trading architecture with strict rules on imposing
tariffs," says Burgis. "African countries have adopted the market
orthodoxy that led them to pare down states and embrace global economic
competition -- in which they are overwhelmingly the losers."
A diamond polishing factory in Botswana, part of a high-skill industry that has been developed from the nation's raw materials.
Collective complicity
Responsibility
for the plight of resource-dependent nations goes beyond traders and
dictators. The global economy still requires a huge supply of raw
materials that originate in Africa, creating an imperative to maintain
the existing, destructive model.
Burgis applauds steps such as the Kimberley Process for preventing 'blood diamond' trade, but feels that developed nations could go much further.
"The
lesson for those in the West who want to address the damage from oil
and mining industries, and the corruption that goes with them, is 'put
your own house in order,'" he says. "There has been a tendency to
lecture African rulers (but) the problems are in the world financial
system."
The author suggests a global public registry of companies and trusts to counter the use of shell companies in illicit deals.
"That
financial secrecy is available is not Africa's fault," says Burgis.
"Address the part that sits within the global system, which can be
regulated from Western capitals."
The
nature of the global supply chain means that complicity with the crimes
around resource extraction extends from African dictators all the way
to a European mobile phone buyer.
At
every level, delusion is a powerful barrier to change. Burgis recalls a
meeting with a leading figure of Angola's kleptocratic regime, who
argued passionately that he was protecting his people from even worse
abuses.
"It's human nature," says Burgis. "Nobody thinks they are the bad guy."
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