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CHINA’S PARTITION OF AFRICA: Will US Intervention Slow Down the New Silk Road?

A letter from 16 US Senators raises questions about Chinese debt-trap imperialism – and Washington’s role (via the IMF) in bailing out distressed countries. As Africa’s leaders are offered new sweeteners by Beijing, the continent becomes the stage for a new geopolitical contest between the 21st century’s Great Powers. By MARY SERUMAGA.

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CHINA’S PARTITION OF AFRICA: Will US Intervention Slow Down the New Silk Road?
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The just ended Forum of Chinese–African Cooperation (FOCAC) in Beijing may prove to be the straw that breaks the camel’s back for the United States, long irritated by Africa’s relationship with an Asian country as powerful as itself. The 2018 forum was attended by more African leaders than attended the last AU Summit. Only six heads of state did not show up; Tanzania, Burundi, DRC, Eritrea and Algeria and were represented by vice presidents and prime ministers. Swaziland alone had nothing at all to do with FOCAC.

On 3 August, the day FOCAC 2018 opened, sixteen US senators wrote to Steven Mnuchin, Secretary of the Treasury and Michael Pompeo, Secretary of the Department of State demanding to know what the Administration proposes to do to stop China’s attempt to dominate the global economy. First signatory is Senator David Perdue, described as ‘Donald Trump’s Man in the Senate’. The letter is therefore guaranteed to get attention.

The senators point out that 23 of the 68 countries hosting Chinese Belt and Road Initiative (BRI) projects are at risk of debt distress. Eight countries with future BRI infrastructure investments are also at risk of debt distress. China is accused by the Senators of ‘predatory lending’,’weaponizing’ capital and holding poor countries to ransom when they fail to repay.

On 3 August, the day FOCAC 2018 opened, sixteen US senators wrote to Steven Mnuchin, Secretary of the Treasury and Michael Pompeo, Secretary of the Department of State demanding to know what the Administration proposes to do to stop China’s attempt to dominate the global economy.

This is not to say that the West has not weaponized capital as a matter of course. Sometimes literally. For example, International Lending Institutions will lend to countries that suppress political opposition. Such oppression means citizens cannot fulfil their right and duty to oppose unsustainable debt through democratic processes. In Uganda, electoral violence prevents the citizenry from freely campaigning for elections. Knowing this, Western sovereign lenders provide the means of repression by arming, for example, Uganda’s Special Forces Command while lending to the perpetrators of violence.

The core of the argument the US Senators are preparing against China’s BRI is this: countries in debt distress caused by BRI projects are also in debt to the IMF and turn to the IMF for bailouts. The US is the IMF’s biggest shareholder. As such, IMF bailouts to countries in debt-distress from Chinese loans would be transferring US taxpayers’ money to China. Sri Lanka’s bailout in 2016 did not prevent the loss of Hambantota Port.

However the major immediate cause of concern is Pakistan, reportedly planning to apply for an IMF bailout after her BRI indebtedness under the China–Pakistan Economic Corridor put Gwadar Port at risk. Djibouti whose debt to China is equivalent to 75% of her GDP (its total foreign debt to GDP ratio is 85%) is said to be at risk of losing Doraleh Container Terminal to China, an asset strategically important to the United States.

Uganda is not mentioned but is likely one of the other countries alluded to. Uganda’s debt–distress has been on the horizon for at least two years. The Auditor General signaled it in 2016. A recent attempt to increase tax revenues led to the #ThisTaxMustGo movement, an outcry from a public that sees little in the way of public services, and more recently, the disruption of a tax policy conference attended by donors.

What is important to Uganda is the questions put by the senators to the American Administration;

“As the largest contributor to the IMF, how can the United States use its influence to ensure that bailout terms prevent the continuation of ongoing BRI projects, or the start of new BRI projects?”

An understanding appears to have been reached with Kenya which this year applied for a bailout and simultaneously suspended all new infrastructure projects apparently in return for assistance.

The senators also require the Treasury and the State Department to investigate: i) which other countries are likely to require bailouts; ii) how BRI countries in debt distress can be assisted to repay their loans; and iii) alternative sources of infrastructure funding.”

The closing paragraph of the senators’ letter indicates that another proxy war is about to be fought on the African continent. It is clear the senators want the United States to disrupt Chinese–African cooperation:

“In his speech to the 19th Party Congress, President Xi declared, ‘China’s development does not pose a threat to any other country. No matter what stage of development it reaches, China will never seek hegemony or engage in expansion.’ It is apparent that this statement is fundamentally false, and the goal of BRI is the creation of an economic world order ultimately dominated by China. It is imperative that the United States counters [emphasis mine] China’s attempts to hold other countries financially hostage and force ransoms that further its geostrategic goals.”

African leaders attending FOCAC have been promised $60 billion in development assistance. It will be made up of grants and more importantly, loans from Chinese financial institutions. China in 2018 has promised to import more non–commodities (finished goods) from Africa. At FOCAC 2015, the same amount was promised. Given that several countries are already struggling to repay Chinese debt, which carries higher interest and is repayable over a shorter period than loans from other sources, the offer is not necessarily an altruistic gesture.

At the end of FOCAC 2015 held in Johannesburg, the dysfunctional relationship between Africa and China was already evident. The relief of the Chairman of the Africa Union as he welcomed the blandishments of President Xi Jinping was palpable. Probably remembering the Bandung Conference of 1955, in a quivering voice President Robert Mugabe (for it was he) delivered one of those lyrical declamations he was so good at, “Here is a man representing a country once called poor, a country which was never our coloniser. But there you are, he is doing what we expected those who colonised us yesterday to do.”

With the colonial and especially settler–state experience, and after the Continent has been all but disembowelled so that its endowment of natural resources has failed to translate to a decent standard of living as the norm, the current belief that China or anyone else is going to do the work, is astounding in its naïveté.

The relationship between China and Africa is said, over and again, to be rooted in friendship and equality. It is this that is expected to provide the impetus to begin to deliver on goals whose attainment is long overdue: industrialization, modernisation of agriculture, poverty reduction, technological capacity building and economic development. These are expected to be reached by means of Chinese capital, technology and personnel for the construction of roads and other infrastructure, investment and trade facilitation and environmental protection. Sino–sceptics recall the very same development goals were discussed at great length with Europe and America in the immediate post-independence period and beyond.

For his part, President Museveni expressed the hope in Beijing 2018, that the relationship with China would allow Africa to, “more easily work with our friends in the EU and the USA on the basis of win-win arrangements, not the win–lose arrangements of the last 500 years […] many African countries and the former colonizers can put to good use the historical relations with the British Commonwealth or the French Community. What was previously negative could become much more positive than it has been hitherto.”

The relationship between China and Africa is said, over and again, to be rooted in friendship and equality. It is this that is expected to provide the impetus to begin to deliver on goals whose attainment is long overdue: industrialization, modernisation of agriculture, poverty reduction, technological capacity building and economic development…Sino–sceptics recall the very same development goals were discussed at great length with Europe and America in the immediate post-independence period and beyond.

In the interim, raw materials have continued to dominate African exports. Structural Adjustment Programmes led to deindustrialisation on a grand scale. Despite mineral and other endowments dwarfing anything available in the West or the East, African countries continue to occupy the lower rungs of the Human Development Index.

Listening to Xi Jinping’s address at FOCAC 2015, one would have thought China has no needs of her own – they were not mentioned either by China or her African hosts – and that China is in it for purely altruistic reasons. Mugabe, the AU chairman, claimed that the -Sino-African relationship goes far deeper than mineral extraction. The 50,000 elephants we lose to poachers every year did not feature either.

Pro–FOCAC leaders no doubt recall the heady days of Bandung and the creation of the Non-Aligned Movement, when there was an Afro–Asian bloc at the UN General Assembly. Back then, African countries were proactive and saw themselves as actors on the world stage rather than as mere props in other people’s scripts and proxies in their wars. An episode that occurred during the Cold War illustrates this. The US sought to bar China from membership of the UN General Assembly and African leaders were lobbied by high-level American officials to vote against China. Just a week after Nigeria gained independence in October 1960, Prime Minister Balewa called on President Eisenhower. Having assured Eisenhower that he was not a Communist, Balewa made a request for bilateral aid and was assured aid would be available through the UN Special Fund. He was advised that the United States preferred making loans to giving grants.

Later in the conversation in answer to a question from Prime Minister Balewa, President Eisenhower said that a vote by Nigeria in favour of Red Chinese representation at the UN would “constitute such a repudiation of the U.S. that we would be in a hard fix indeed.” [i] Balewa in turn expressed surprise that a nation of 650 million should be excluded from representation at the world body. In the event, Nigeria voted against the U.S. position on the Chinese delegation.

Nowadays things are different. Uganda abstained from the historic UN General Assembly vote against the United States’ endorsement of Israel’s annexation of East Jerusalem when Washington announced that the US was moving her Embassy there. Kenya dodged the vote altogether. In an earlier resolution (December 2016) against, among other things, Israel changing the status of internationally recognized Palestinian territory via settlements, Uganda abstained.

FOCAC 2015 provided US$5 billion in grants as a sweetener and US$ 55 billion in loans. In 2018 a further $60 billion has been pledged. Going on precedent, the majority of these funds will not reach their intended beneficiaries, for easily understandable reasons. Apart from the bureaucracy surrounding the loan applications, most African countries lack a strong regulatory framework. The result: massive waste and theft of public funds. Uganda, for example, has spent billions of dollars of tax revenues and loans on civil service reform, and millions on programmes to deepen democracy yet an enabling environment for sustainable development continues to elude her citizens. State brutality is on the increase.

Uganda’s allegiance to China does not require her to address failures in deepening democracy and inclusive development even for public relations purposes. Although the Western development industry too has tolerated what it calls ‘democratic deficits’ their leaders can be called to account because unlike China, they continually profess democratic values. What follows below is a brief run-through of recent examples of kleprocracy and incompetence supported in Uganda:

The National Roads Authority (UNRA) was established in 2006 to make road construction more efficient than it was under the Ministry of Transport. With its large budget, the UNRA quickly became known for some of the country’s more colourful corruption scandals. In 2015 UNRA excelled itself when the country lost in the region of UGX 24.7 billion (US$ 6.5 million at current rates) in the Mukono–Katosi road scam. The Inspector General of Government found that the Minister for Transport, Abraham Byandala, abused his office by inducing the supposedly independent UNRA to give a contract to one Eutaw, a firm claiming to be related to an American firm of a similar name. The firm, which turned out to have no relation to its American ‘parent company’, was paid advances for work it was unable to complete. Byandala was acquitted in August 2018, for insufficient evidence.

Uganda’s allegiance to China does not require her to address failures in deepening democracy and inclusive development even for public relations purposes. Although the Western development industry too has tolerated what it calls ‘democratic deficits’ their leaders can be called to account because unlike China, they continually profess democratic values.

Meanwhile in the south, the brand new highway to Rwanda literally split in two with one half sliding down the hill. The much–praised Northern By–pass in Kampala was closed as the swamp through which it was built began to reclaim it in the March rains. The Roads Authority is slated to be disbanded by presidential decree as a waste of resources.

The Uganda National Bureau of Standards (UNBS), was established in 1983, “to enforce standards for protection of public health and safety and the environment against dangerous, counterfeit and substandard products; ensuring fairness in trade and precision in industry; strengthening Uganda’s economy….” Given that the disposal of disused short–life cheap goods imported from China is becoming an environmental hazard and counterfeit drugs a health hazard, UNBS and other specialised quality assurance agencies would need to be much stronger if the goals of green development, health and prosperity are to be attained.

The CEO of UNBS was suspended in 2015 with various management weaknesses cited as the reason. In 2018, the situation has deteriorated to the degree that foods have been found to be adulterated, notably meat preserved with formaldehyde.

The judiciary (Justice Law and Order Sector) is at once a source of hope and a constant source of disappointment. Sovereign debt has legal and constitutional ramifications. For example, Uganda’s constitution requires the state and its citizens to ‘defend the independence, sovereignty and territorial integrity of Uganda’ and to build national strength in political, economic and social spheres to avoid undue dependence on other countries and institutions.’ This is meant to be done mainly through Parliament which approves or rejects debt. Clearly unsustainable debt flies in the face of independence.

Other indebted countries too have fallen into debt in contravention of the law. Mozambique’s $2 billion secret loans (one from a Russian bank) were taken out by the finance minister who was not authorised to do so. He later admitted that he was unaware when he signed the guarantee that he gave the creditors sovereign powers over all Mozambican assets until the debt was repaid.

Sovereign debt has legal and constitutional ramifications. For example, Uganda’s constitution requires the state and its citizens to ‘defend the independence, sovereignty and territorial integrity of Uganda’ and to build national strength in political, economic and social spheres to avoid undue dependence on other countries and institutions.’ This is meant to be done mainly through Parliament which approves or rejects debt.

This is what the US Senators refer to as ‘predatory lending.’ However, the same administrative weaknesses taken advantage of by Chinese and Russian lenders are relied on by Western lenders despite the claim that they operate under different standards.

It was expected that the Constitutional Court would strike down Parliament’s removal of presidential age limits further reducing the chance of removing the incumbent kleptocratic regime.. What came as a shock was the ruling on the invasion of Parliament by the Special Forces beating, torturing several Members of Parliament” physical assault on the elected representatives of the people by ‘security operatives’.

During the appeal against age limit removal, only one out of five judges ruled that state violence is unconstitutional in all circumstances and that it therefore rendered the Age Limit Act null and void. Justice Kenneth Kakuru said,

“The Constitution demands that citizens of this Country be treated with respect and dignity by all agencies of the State. Again I am constrained to refer to the maiden speech of President when in 1986 he promised Ugandans that no citizen would be beaten by the army (read or the Police) as it had been the norm in the past regimes.

The police in Uganda have no right to frog march Members of Parliament, beat them and humiliate them the way they now routinely do which this Court takes judicial notice of being a notorious fact [emphasis mine].”

The rest of the judges were of the view that the attack on Parliament did not nullify the Age Limit Act opening the way for President Museveni’s life tenure and also for assaults on members of parliament.

Many blame the constitutional court’s failure to condemn state violence for the subsequent attack on members of parliament and their supporters in the Arua by–election weeks later.

For two weeks beginning in Arua on 13 August 2018 the armed forces indulged in a wave of electoral violence that spread to other cities. At the time of writing, a high level press conference has just ended in Kampala. Briefing the media about the electoral violence, the Minister for Security said the armed forces acted with restraint and that had they not, casualties would have been more severe. In other words – be grateful we let you live. A further update: President Museveni addressing his party caucus warned them that he has the power to shut down Parliament.

Justice, law and order, health, education, immigration, infrastructural development and tax administration, are all sectors important for development which have exhibited persistent weaknesses. Neither debt nor grants (Chinese or Western) have removed precarity from the manner in which the country is governed or from the day–to–day existence of the majority of Ugandans. Increased debt and grants are not the answer.

*****

In any case, the Chinese project is about to receive major push–back from the United States. A decade ago, correspondence between the US Embassy in Kampala and Washington indicated concern about the manner in which China beats American firms in bids for oil concessions and infrastructure projects by bribing government officials. (Email-2011-10-19 07:38:18 From: gary@ocnus.net To: responses@stratfor.com. Source: Wikileaks). At some point, officials discussed (with the UK) but did not implement travel bans on the senior government officials taking bribes, possibly leaving room for negotiation. That era may have ended.

There are two possible outcomes for Africa. It is just possible that African, Asian and South American countries could become active negotiators this time around. If they were to engage regional blocs they would be able to come away with more profitable and transparent financial arrangements. The best case scenario would include repudiation of illegitimate debt; all monies recklessly loaned to kleptocrat administrations and all those used to perpetuate despots in power.

The best case scenario would include repudiation of illegitimate debt…Failing that China, Europe and the United States will simply agree to a second partition of Africa into new spheres of influence…The current crop of African leaders, noted mainly for bribe-taking and theft of public resources is more likely to cooperate in the second partition of Africa than to restructure the basis of the Continent’s relationship with the imperial powers.

Failing that China, Europe and the United States will simply agree to a second partition of Africa into new spheres of influence. Which brings us to the main ingredient lacking: leadership. The current crop of African leaders, noted mainly for bribe-taking and theft of public resources is more likely to cooperate in the second partition of Africa than to restructure the basis of the Continent’s relationship with the imperial powers.

[i] FRUS 1958-1960 v.14 Newly Independent States, Document 77, Memorandum of Conference with President Eisenhower, October 8, 1960.

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Mary Serumaga is a Ugandan essayist, graduated in Law from King's College, London, and attained an Msc in Intelligent Management Systems from the Southbank. Her work in civil service reform in East Africa lead to an interest in the nature of public service in Africa and the political influences under which it is delivered.

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Khashoggi Murder: Is There a Double Standard at the United Nations?

The UN’s silence on Khashoggi’s much-publicised murder was surprising for many because his killing had created shockwaves globally, not only because it had occurred inside an embassy but also it had apparently been carried out in a cruel medieval manner that entailed torture and dismembering of body parts.

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Khashoggi Murder: Is There a Double Standard at the United Nations
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In June this year, Agnes Callamard, the United Nations rapporteur on extrajudicial, summary or arbitrary executions, made a startling statement that is not usually heard within the hallowed chambers of the UN. Not only did she implicate a rich member state in the killing of the Saudi journalist and Washington Post columnist Jamal Khashoggi, she also castigated the UN for not doing enough to address the issue.

Callamard told the UN Human Rights Council, whose members include Saudi Arabia, that Khashoggi’s murder “constituted an extrajudicial killing for which the State of the Kingdom of Saudi Arabia is responsible”, implying that Saudi prince Mohamed bin Salman, the de facto head of the Saudi kingdom, may have played a crucial role in the brutal murder of the journalist at the Saudi consulate in Istanbul in October 2018. She also criticised the UN Secretary-General Antonio Guterres for failing to demand accountability for the murder of the journalist, adding that “the silence of this intergovernmental body and lack of measures were a disservice to the UN and to the world”. (Although Callamard reports to the UN, she is not a UN staff member.)

The UN rapporteur argued that because the UN has remained quiet on the killing of the journalist, who had been a critic of the regime in Saudi Arabia, it has put at risk the lives of all journalists and has violated its own mandate to protect freedom of speech and expression. Journalists and human rights activists around the world had said that the killing of the journalist was a direct assault on freedom of the press. She called on the UN and its member states to carry out an international criminal investigation on the murder.

The UN Secretary-General responded that the only way to carry out such an investigation was through a UN Security Council resolution sanctioned by the Council’s five permanent members, namely the United States, Britain, France, Russia and China. However, this is highly unlikely because at least one of these members – the United States – has been reluctant to push investigations into the murder further. President Donald Trump, who is more keen on selling arms to Saudi Arabia rather than on ensuring that human rights are respected, has been lukewarm about Khashoggi’s murder, and has even hinted on several occasions that doing business with the Saudis is more in the US national interest than ensuring that justice for Khashoggi is done. Callamard claims that the US government did little to assist her investigation, and that she was not granted access to the CIA or the US Department of Justice.

The UN Secretary-General responded that the only way to carry out such an investigation was through a UN Security Council resolution sanctioned by the Council’s five permanent members, namely the United States, Britain, France, Russia and China

The UN’s silence on Khashoggi’s much-publicised murder was surprising for many because his killing had created shockwaves globally, not only because it had occurred inside an embassy but it had apparently been carried out in a cruel medieval manner that entailed torture and dismembering of body parts. The fact that his body has not been found to this day also suggests that perhaps it was burnt beyond recognition or has been buried in a secret location.

Callamard’s call to make the Saudi regime accountable for Khashoggi’s death has largely fallen on deaf ears, with the Saudis insisting that they have carried out their own investigations and that the culprits are facing trial. No one quite believes that these trials are actually being conducted by impartial courts or if even they are, whether the suspects are actually the ones who carried out the killing, which was conducted in hit squad manner that could only have been sanctioned by the highest echelons of the Saudi government. One right-hand man of Prince Salman is widely believed to have overseen the murder but is not among those being prosecuted. Callamard says she received no cooperation from Riyadh when she conducted her investigations, and that Saudi officials have been largely opaque about the case.

It is possible that Callamard is unaware of the limitations of the UN or how international diplomacy works? Or maybe she believes that in her role as an impartial UN rapporteur she can push the international community to do the right thing.

What most people don’t realise is that the UN may appear to be a neutral, independent body, but its decisions have always been influenced by its most powerful and influential member states, who almost always have their way when it comes to handling international crises. For instance, the United States did not seek UN Security Council approval before invading Iraq in 2003, nor did the UN reprimand the US for taking this illegal action.

People also forget that a sizeable number of the UN’s 193 member states are dictatorships or repressive regimes that do not care much for human rights. Freedom of expression is not on top of the agenda of influential member states like China and Russia, for instance. So, as the setter or moral or ethical international standards, the UN is hardly the place to go.

It is possible that Callamard is unaware of the limitations of the UN or how international diplomacy works? Or maybe she believes that in her role as an impartial UN rapporteur she can push the international community to do the right thing.

In the Khashoggi case, Saudi Arabia, a big donor to the UN and a key ally of the UN’s biggest contributor, the United States, will do all it can to prevent an international criminal investigation. Saudi Arabia has already said that it will reject any attempt to undertake an international inquiry. The kingdom’s main allies, the United Arab Emirates, Bahrain and Egypt, have also rejected Callamard’s 101-page report, which does not mince words when naming those who were most culpable for the murder of Khashoggi.

Hush money

Why have the UN and the US remained silent on this issue? Well, partly because Saudi Arabia has bought their silence. The US is keen to keep its relationship with one of the biggest buyers of US-made arms and military hardware, hence the lukewarm response to the murder. And the fact is that the UN Security Council’s five veto-holding permanent members have never really been committed to world peace because wars keep their military industrial complexes going. These countries are the largest manufacturers and suppliers of arms. When wars occur in far-off places, arms manufacturers in these countries have a field day. Wars in former French colonies in Africa keep France’s military industrial complex well-oiled. Wars in the Middle East are viewed by British and American arms manufacturers as a boon for their arms industries.

If there were no wars in the world, the arms industry would have fewer or no customers. It is no surprise then that Donald Trump’s first foreign visit was to Saudi Arabia, which has been buying billions dollars-worth of arms from the United States for decades. Arms from the US have fuelled Saudi Arabia’s ongoing war in Yemen. Thus Saudi officials were neither embarrassed nor dismayed when Trump held up a placard showing the newest weapons his Saudi clients could get their hands on and use in their campaign in Yemen. The connection between military sales and silence on human rights violations became acutely visible in that particular photo opportunity.

In a world where nuclear disarmarmament deals are casually broken by the President of the United States because he has a feud with Iran, the UN remains a paralysed specatator. It has nothing to say, nothing to contribute. No pressure is placed on the United States – which contributes up to a quarter of the UN’s budget – to rethink its policies. There are no press releases issued on the dangers that the cancellation of the deal will pose to world peace.

On the contrary, wars and other disasters provide the UN an opportunity to fund-raise. The UN’s campaign in Yemen, for example, is not about ending the war, but raising donations for the millions who are suffering as a result of the Saudi-led war. Wars and other calamities fuel various United Nations agencies, including the refugee agency UNHCR and the World Food Programme, whose coffers get quickly filled when disaster strikes, which enable their employees to continue earning hefty tax-free salaries.

The UN is also not keen not to upset a key US ally and a big contributor to its coffers. Saudi Arabia uses its vast oil wealth to cover up its crimes. In March 2018, for example, the UN received nearly $1 billion from the Saudi prince as a donation towards the UN’s efforts at alleviating a humanitarian crisis in Yemen – a crisis that would not have occurred if the Saudis had not bombed Yemen in the first place. The war in Yemen has killed several thousands of people and created a humanitarian crisis in which more than 20 million people are in need of basic supplies.

Saudi Arabia – the perpetrator of this war crime – is now trying to be the face of compassion in Yemen. The donation was a great photo opportunity for the prince, who was seen giving the money to a smiling UN Secretary-General at the UN’s headquarters in New York. Antonio Guterres did not use the opportunity to urge the prince to stop the onslaught against the Yemenese people. In fact, the UN has remained rather muted throughout the crisis in Yemen, and only speaks out when soliciting for donations for the traumatised Yemenese population.

And in 2016, after a leaked UN report on children’s rights violations became public, the then UN Secretary-General Ban Ki-moon admitted to removing Saudi Arabia from a list of countries that had violated children’s rights. This admission shocked the world but did not result in the resignation of the Secretary General.

Hush money has bought the UN’s silence on human rights violations that the Saudi state has committed against the people of Yemen and against its own citizens, including women who are jailed for breaking Saudi Arabia’s draconian laws that punish female car drivers and torture those who dare defy the regime. Ironically, Saudi Arabia even has a seat at the UN Human Rights Council, which has left many human rights defenders equally amazed and disgusted.

That is how international diplomacy works at the UN. Keep quiet when big donors violate human rights, but be vocal about violations committed by small, insignificant countries whose voices are drowned out at the UN Security Council and other UN bodies. Talk about women’s rights in Afghanistan but keep quiet about torture chambers in Saudi Arabia. Scold a poor country like Liberia for not doing enough for children’s education, but ignore the plight of children who are sexually abused or trafficked in the United States. Castigate former child soldiers from Uganda or the Congo for crimes against humanity but ignore the war crimes and mass murders ordered by President George Bush and Prime Minister Tony Blair in Iraq.

If anyone still has any doubt that the UN is fair and impartial, its response to Khassoggi’s murder should lay to rest any such illusions.

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War Games: The Truth behind the Government’s Sudden Attack on the Sports Betting Industry

It thus appears that the assault on the betting companies, far from being a general money-laundering investigation, is actually part of the weaponisation of anti-corruption to take down the said well-moneyed senior politician.

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War Games: The Truth behind the Government’s Sudden Attack on the Sports Betting Industry
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For a government that has earned a reputation for its lackadaisical approach to matters corruption—other than those of its political enemies, that is—the resolute assault it has launched on the sports betting companies is intriguing. According to media reports, it was triggered by the Betting and Licensing Control Board writing to the Financial Reporting Centre asking for an investigation into money laundering in the industry. The Financial Reporting Centre is the unit of the Central Bank responsible for money laundering surveillance.

This sequence of events is suspect. Kenya’s reputation as a money-laundering hotspot is well documented, and the government has been under considerable pressure from the United States government to clean up for a long time. One of the deals underpinning the Jubilee government’s rapprochement with President Obama was a commitment to join the Egmont Group, a multinational collaborative platform for combating money laundering and terrorism financing. The 2019 International Narcotics Control Strategy Report submitted to the United States Congress by the country’s Bureau of International Narcotics and Law Enforcement Affairs notes that “despite some progress, Kenya has not fulfilled all of its commitments to join the Egmont Group.”

For a government that has earned a reputation for its lackadaisical approach to matters corruption—other than those of its political enemies, that is—the resolute assault it has launched on the sports betting companies is intriguing. According to media reports, it was triggered by the Betting and Licensing Control Board writing to the Financial Reporting Centre asking for an investigation into money laundering in the industry.

The point here is that it is difficult to believe—given America’s intense interest in this matter—that the betting industry has not been on the government’s anti-money laundering radar all along, especially because some of the industry’s foreign investors have been cited in connection with money laundering by the American government. This being the case, it stands to reason that the government could have opened an anti-money laundering investigation on the betting companies without much ado. Few would have been surprised. And it is quite unusual for sanctions to be meted out as part of an investigation, because as far as we know, there is as yet no determination that individual betting companies have been found culpable. Even money-launderers who are operating legally are entitled to due process.

It becomes even more confounding when the government speaks from both sides of the mouth. President Uhuru Kenyatta has been quoted maintaining that the investigation is purely a tax compliance matter: “Some betting firms have been hoarding taxes but we have managed to push them to pay and we will continue doing so. Those in the betting companies are our friends but we have to agree the government must get its rightful share to build cultural centres and other developments.” It is noteworthy that among the local investors profiled since the onslaught began are prominent establishment figures who featured prominently in Jubilee election campaign financing.

First, just how big is this industry? A government investigation reported the industry turnover at Sh200 billion a year. It is also reported that there are 12 million mobile phone-based betting accounts. But according to the Finaccess 2019 survey report, 1.9 per cent of adult Kenyans participate in sports betting. The Finaccess survey tracks financial inclusion, and is conducted once every two years by the Kenya National Bureau of Statistics in partnership with the Central Bank of Kenya and the Financial Sector Deepening (FSD) Trust. The 2019 survey was administered on a nationally representative sample of 11,000 households.

The figure of 1.9 per cent of adult Kenyans translates to 500,000 people. This in turn suggests that on average, punters spend Sh400,000 per year, or Sh33,300 per month on betting. The average annual wage in 2018, as reported in the Economic Survey, was Sh730,000. If we assume that the punters are spread across the income spectrum, that is, they are not concentrated in the high income groups, it would suggest that punters are spending more than half their income on gambling. This does not seem plausible.

It becomes even more confounding when the government speaks from both sides of the mouth. President Uhuru Kenyatta has been quoted maintaining that the investigation is purely a tax compliance matter

The Sh200 billion turnover is also inconsistent with the national economic data. The turnover of an industry corresponds to the gross output of a sector in the production accounts. A gross output of Sh200 billion would be significant considering that it is larger than that of “accommodation and food services” which captures the entire tourism, domestic, hospitality and restaurant services. As per the International Standard Industrial Classification (ISIC) the betting economy falls under the “arts, recreation and entertainment” sector. However, in the production accounts published in the Economic Survey, it is lumped together in a residual category (“other service activities”) although it is reported separately in the GDP figures (GDP is obtained by deducting intermediate inputs and indirect taxes from gross output). The gross output of “other service activities” in 2018 was Sh154 billion, less than the claimed turnover of betting alone, while the GDP for the “arts, recreation and entertainment” economy is only Sh10 billion. Either the statisticians have missed it altogether, or the Sh200 billion turnover figure is wrong.

SportPesa, reportedly the dominant firm in the industry, has published a statement disclosing its 2018 turnover as Sh20 billion. The only market share figure I could find is reported by the financial market information blog, The Kenya Wall Street, which puts SportPesa’s market share in 2016 at 76 per cent, and a small online survey of 300 respondents conducted by Linet Kwamboka of Data Science Ltd. in January 2019, in which two-thirds of the respondents gave SportPesa as their main betting platform (Betting In Kenya, a Menace or an Income?) These figures suggest an industry turnover in the Sh25 billion to Sh30 billion range.

Even this lower figure does not reconcile with the national economic data. As observed, using the “value-added” approach, the GDP is obtained by deducting intermediate inputs from gross output. In aggregate, these add up to about 45 per cent of gross output meaning that GDP is 55 per cent of gross output. That said, intermediate outputs vary a lot by sector, from 20 per cent in financial services to 70 per cent in manufacturing.

We do not know where the industry falls, but according to a data visualisation published in the Daily Nation titled A Gambling Nation: Betting dominates Kenya’s online searches, the betting industry spent Sh22 billion on advertising in 2018. Advertising expenditure would go into intermediate inputs. This outlay alone would reduce the industry’s GDP to no more than Sh8 billion, about three-quarters of the entertainment economy’s GDP. Still not credible. The advertising figures are a likely source of this inconsistency. According to the source, the total amount of spending on advertising in the country was Sh132 billion, and the main media on which it was spent were television, print and radio. But the turnover of the entire mainstream media industry in Kenya is no more than Sh25 billion, which begs the question where the Sh100 billion-plus was spent.

There is also another anomaly. Betting is said to have grown very rapidly; for instance, the Kenyan Wall Street blog reports a 2016 turnover of Sh56 billion which has supposedly grown to Sh200 billion, fourfold growth in two years. The rapid growth should reflect in the GDP. It does not. The gross output of “other services” increased by only Sh29 billion over the two years, and the entertainment sector GDP by only Sh2 billion. It does look like the statisticians are not capturing this growth in the national economic data.

An industry turnover of Sh25 billion-Sh30 billion together with the figure of 500,000 bettors estimated by Finaccess, translates to an average gambling expenditure of between Sh4,000 and Sh5,000 per month. This is a more plausible figure, and it is also in line with the figures reported by the respondents of Linet Kwamboka’s online survey. These figures are telling us that most punters spend between Sh500 and Sh1500 on betting a week—beer money, literary; the Managing Director of Kenya Breweries recently lamented that sports betting has become a serious competitor. By and large, the much-lamented gambling epidemic appears to be no more than substitution of one vice for another. No doubt there are gambling addicts, there always were, just as there are alcoholics.

SportPesa, reportedly the dominant firm in the industry, has published a statement disclosing its 2018 turnover as Sh20 billion. The only market share figure I could find is reported by the financial market information blog

We are still left with the Sh200 billion figure though. Where does it come from? The authorities have not been forthcoming on how the figure was arrived at. I see two possibilities: a purely technical accounting issue, and the money laundering dimension. The accounting issue is well illustrated by this account of The Broker, a punter who contributed to this discussion on twitter:

Img.1

Although The Broker gets the gist of it, his math is actually incorrect. His outlay of Sh10,000 generated three betting transactions totalling Sh22,000 (two Sh10,000 bets and one Sh2,000 bet) and he lost Sh7,000 not Sh8,000. The Sh7,000 is the betting company’s total revenue from his betting activity. Let us extrapolate: if we work with the Finaccess figure of 500,000 punters, the Sh. 200 billion turnover figure requires an average of Sh33,000 of betting transactions per person per month, which is within striking distance of The Broker’s figure of Sh22,000.

The Sh200 billion turnover is being buttressed by another figure, that of the 12 million betting accounts held with the mobile phone companies. If each account represented a unique customer, then those 12 million accounts would be held by half the adult population. We also know that the vast majority of bettors are the youth. The 12 million accounts figure is about the same as the total population of the 20-35 age group, which would suggest that virtually every young person has a betting account. That is a stretch and it stands to reason that some punters will have betting accounts with different companies. Still if we assume that each bettor has four accounts on average, this still translates to three million unique accounts, six times the Finaccess figure of 500,000. In its statement, SportPesa gives a figure of 700,000 visitors during the first half of 2019.

Img.2Part of this conundrum may be explained by another contribution to this debate on Twitter by one Jerry, who claims to have opened over 10,000 phantom betting accounts. Pressed to explain why, Jerry said that it was paid work. Why would betting companies pay people to open phantom accounts? The readily apparent reason is to inflate the size of the business and by so doing be able to pass off laundered monies as revenue, as would massive advertising and high profile sports sponsorships. It turns out that the betting epidemic may not be as big as it is made out to be and indeed, the Finaccess findings may be a more accurate reflection of the size of the industry.

According to a source quoted in the media, the Interior Ministry has “established that three politicians are involved in the business through proxies in the firms suspended on suspicion of money laundering”. The article goes on to report one of the issues under investigation as “whether a well-moneyed senior politician is among the shareholders of one of the big suspended firms through a company registered in a tax haven which is being used to launder money stolen from public coffers”.

No prizes for guessing who the well-moneyed senior politician is.

It thus appears that the assault on the betting companies, far from being a general money-laundering investigation, is actually part of the weaponisation of anti-corruption to take down the said well-moneyed senior politician. The vitriolic, lawless modus operandi accords with the manner in which this political warfare is being prosecuted generally. As is Uhuru Kenyatta’s statement—for the betting companies are indeed his friends who, unfortunately for them, have become collateral damage.

It is also telling, I think, that the onslaught on the betting companies has coincided with the high profile arrests and opening of prosecutions in the Arror and Kimwarer dams corruption case. Among the revelations from the investigation is that the money laundering trail led to London and Dubai—both are members of the Egmont Group.

From this we can infer that the Government was quite happy to cozy up to the industry until the William Ruto takedown opened a Pandora’s box. Hitherto, it mattered not whether the betting business is a Sh20 billion or Sh200 billion business, whether it was evading taxes, fuelling a gambling epidemic, or even laundering money for drug lords, human and wildlife traffickers and terrorist networks. You can get away with all that, and even buy protection for all of that, just as long as you steer clear of the struggle for power.

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In Memory of Chris Msando: Murder Most Foul

Mr Christopher Msando was the slain Independent Electoral and Boundaries Commission ICT manager, who was assassinated days before the disputed August 8 2017 elections.

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Dear Chris,

It has been two years since we last spoke. A lot has happened, while you have been away. Eva, Allan, Alvin and Allison miss you a lot. The agony of your mother continues to haunt us. The sorrow of your sisters, brothers and friends weighs heavily on many. But the hope of a better tomorrow still beckons. Hope that your death and that of many others was not in vain.

Let me tell you what happened after your brutal torture and murder. Your assassination was roundly condemned. Announcements made on investigations went nowhere. The 8 August 2017 elections proceeded. You remember the concerns you always raised about the electronic transmission of results? It played out in exactly the way you and others feared it would. The system froze at 8:30 pm on Election Day and what happened thereafter, remains a mystery.

The Chairman of the IEBC (Independent Electoral and Boundaries Commission) could not confirm or deny if the system had been manipulated. He gave the Glomar response. The one that brings chills down the spine, reminding one on why you paid the ultimate sacrifice. Why they permanently got rid of you. They knew you would have detected and made known the manipulation of the transmission of the presidential result. The games you had alerted the Commission to. The “tunnel” created to the servers. Those servers, which like your murderers, continue to be kept in secrecy.

I will spare you, my brother, the details of what happened thereafter. Baby Samantha Pendo is too young, to tell you of her ordeal under the security forces. Unfortunately, there are more than 100 young men and women lying closer to you with more credible testimonies than I could ever deliver. The lives lost in the pursuit of political interests. In the struggle for electoral justice. The collateral damage in the quest for political and economic control by a tiny elite – the sons of Kenya’s first President and Vice President, respectively. The reign of the dynasties and the clamor of the so-called Hustlers to find a place in the ruling class.

My brother, I know how much you cared about your work at the IEBC. So, indulge me in a bit of gossip that I know you disliked. Do you know that your position is still vacant at the IEBC? Your shoes are seemingly too big to fit. Oh, and the rest of the Commission is in shambles. I am sure you remember the Commissioner with long dreadlocks. The one you often appeared on television with to explain how the KIEMS (Kenya Integrated Election Management System) gadgets worked. Naively thinking that your honesty was enough to change a path the powers had destined years before you started your jobs. Thinking that you could out-manoeuvre ‘the system.’ The real owners of the country. She resigned before the October election.

And that young man who was hired to manage the Secretariat? That one with previous zero management experience. The one who pleaded for your director to be brought back to the Commission after he had been suspended. The one who feared that with you in charge, their plot would be foiled. The one who was among the last people you had a meeting within the office shortly before you disappeared. The one who asked you to return to the office after your television presentation. Yes, the one who was always close to the powers that be. The political class abandoned him. And do you know what happened next? Three Commissioners resigned in solidarity with the young man. I know it will come as a surprise to you that the fluent Swahili-speaking Commissioner was among those three. But your Chairman is still hanging in there, with two unlikely allies. Those two Commissioners who disrespected him the most. The ones who openly defied him all the time.

My brother, I digressed. I know you are curious to know what happened in 2018. Dr. Miguna Miguna swore in the People’s President Raila Odinga on 30 January 2018. It was one of the shortest terms in office. It lasted one month, for he voluntarily gave it up on 9 March 2018. The country was perplexed to see him shaking hands with “his brother” President Uhuru Kenyatta at Harambee House. In the Kenyan style of avoidance disorder, we resorted to humor and labelled it a Handcheque. The country was told that the journey to Canaan was still on. The crocodiles had disrupted it but that their team of experts would build bridges to deliver Kenyans to Canaan. Only if they knew how black people are currently ill-treated in Canaan, they would not dare promise us that! Millions of shillings have been spent on “collecting views” from wananchi. And yet, the report of the experts was probably finalized before they even started their rendezvous. It is the usual elite bargain. The dynasty ganging up to change the constitution to perpetuate their hold on power and the economy.

Speaking of the economy, Chris, it is in peril. According to data from the Central Bank of Kenya, as of January our total debt stood at 5.2 trillion, one of the highest in Africa giving us a debt ratio to GDP of 56%.

If it were not for the remittances from the Diaspora averaging Ksh 24 billion per month, the recently floated kachumbari bond, the bailout by the World Bank among other fiscal policies, the situation would have been worse. Corruption is at its highest peak. According to the Corruption Tracker website, the total amount of money stolen from public coffers stands at a staggering KES 8,061,872,800,000 since 2014. The intra-Jubilee Party fights have one silver lining as the different factions are competing to expose each other. Each day they wash their dirty linen in public, allowing us to have a glimpse of the extent of their theft.

Chris, I know you do not have much time to read all this. You have better company. I can imagine what it must be to listen to the Kenyan heroines and heroes of the democratic struggle who rest in peace with you. The numerous men and women murdered by the Kenyatta I and Moi regimes. Those who lost their lives in the various post-election violence episodes. Those who paid the ultimate price in the liberation struggle. But spare me a few more minutes to tell you about the latest in our political machinations.

I will invoke the name of the love of your life to get your attention. Do you remember Eva’s speech at your funeral service? It was moving and powerful. Her words, “may you not have peace”, continue to haunt us each day. Collectively as a country, we have found peace elusive. Those high-ranking politicians who tried to malign you, to cover up your assassination, many of them are now claiming that their lives are in danger. It is as if the hunter has become the hunted. Remember those who refused the services of foreign intelligence services to unravel your murder? They are now busy visiting those foreign countries in the name of capacity building to undertake investigations. Oh, my friend, Chris, I can hear your quintessential booming laughter.

You must be saddened to see the hopelessness among the youth. The unemployment rate is unsustainably high. There is a sustained gutting down of our education sector with a Cabinet Secretary who de-emphasizes university education. The running down of the health services with no respect for the nurses and doctors. The pain of farmers who have no competitive prices for their maize and yet the cartels are bringing in imports. The extra-judicial killings of young men in marginalised neighbourhoods. The depression of a nation, the devasting mental illness with the associated spike in suicides, femicides and homicides. The plunder of our environment in the race for resource extraction.

Knowing you, I must stop enumerating the problems. You were always the ultimate optimist, pragmatist and problem solver. There is no challenge that was insurmountable to you. You always defined the challenge and provided options, even on what appeared to be impossible tasks like protecting the servers!

Chris, I will finish on a rather positive note. That despite the gloom, there is hope. Young men and women are organizing on social media in ways unimaginable to those of our age. They have initiated social justice centres throughout the country to push back on extra-judicial killings. The #SwitchOffKPLC and The DeCoalonize movements are leading on fighting off the energy cartels and for environmental justice. The fledging Kenya Tuitakayo Movement, continues to unify Kenyans around common objectives. The Limuru III meeting on 7 July re-energized the calls for a grass-root based leadership to secure the leadership of the State and defend the 2010 Constitution. New political parties such as the United Green Movement, Ukweli Party, among others promise alternative leadership to the country. There is hope that the struggle for social, political and economic liberation is not in vain.

Let me stop here for now, for I know that on this second anniversary of your murder, there are many others waiting in line for your attention.

Rest in peace my brother.

My very best regards,

Miriam

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