“Hum apse beimani thodi karenge”. (Translation: I cannot be dishonest with you/I cannot betray you.) This is what a disabled hawker in New Delhi’s Connaught Place told me when he handed me the correct change for a Buddha sculpture I had just bought from him. Unlike a typical Delhi resident, I had not haggled with him about the price of the sculpture – on the contrary, he had himself volunteered to give me a discount. As I was walking away after making the purchase, he stopped me, saying that he had not given me the correct change and that he was not the type of person who could be dishonest.
I thought about this incident later and wondered what might have prompted a poor hawker to say these words to me. Why was it important for him to establish his honesty? The change he handed over to me was worth about $4, hardly an amount that I would have missed. So why did giving the money back to me matter to him? (It’s good when Kenyans travel abroad – they get to see how other people go about their daily business.)
It’s possible that this hawker was not particularly honest and that I had paid much more for the sculpture than it was actually worth, and so he was creating the perception that, in fact, I had got a bargain. It’s possible that in the Indian entrepreneurial tradition of establishing trust when conducting business, he saw in me a potential future customer, and therefore, wanted to confirm to me that he could be relied upon to be honest. It’s also possible that he was just a con artist who used nice words to make his customers feel good.
Upon further reflection I realised that this particular hawker was operating within a context and culture that valued integrity – if not in everyday practice (India is, after all, one of the most corrupt countries in the world) then at least in intention. People want to feel trusted and want to be able to trust other people, and this trust is what makes all kinds of transactions – both personal and in business – possible. The announcement by a hawker who I will probably never meet again that he cannot betray me reflects a culture where relationships are held together by an implicit or explicit understanding that trust should not be broken.
I have been thinking a lot about trust and betrayal in the wake of the Sharon Otieno murder case, which has generated knee-jerk reactions from Kenyans, ranging from “She was an immoral woman whose actions led to her death” to “She is a victim of a patriarchal culture that exploits young women”. While salacious details of her affair with the Migori governor, Okoth Obado, were being published in the daily newspapers (which seem to have borrowed a leaf from the UK’s sleazy tabloids), no one seemed interested in asking why it has become acceptable in our society for young women to have “sponsors” in the first place. Al Jazeera and BBC did programmes on this phenomenon, but the local media seem to have accepted it as a way of life. One Kenyan newspaper even went as far as interviewing “sponsees” whose rags-to-riches stories were probably a source of inspiration to thousands of other young struggling women. One female politician had the audacity to say that it is perfectly okay for young women to look for wealthy older men to pay for their lifestyles because life is difficult and a woman has to do what a woman has to do to survive. So much for women’s empowerment!
I have been thinking a lot about trust and betrayal in the wake of the Sharon Otieno murder case, which has generated knee-jerk reactions from Kenyans, ranging from “She was an immoral woman whose actions led to her death” to “She is a victim of a patriarchal culture that exploits young women”.
We live in the “Magical Kenya” that Christine Mungai describes so well in a recent article. Sharon Otieno and Okoth Obado epitomise this Kenya where betrayal and dishonesty have come to define relationships, where all human activity is reduced, in Mungai’s words, to “a form of economic calculation, dismissing love, empathy and care as powerful but unfortunate delusions”. This is not a Kenya where a hawker will give back money to a customer because his integrity matters to him more than the extra money he might obtain through deception. It is a country where a governor calls a press conference with his wife and grown-up children in tow and admits to an illicit affair without feeling an iota of shame or guilt. It is a country where a young woman who has three children with another man feels that she can extort money from her new rich lover (also known as “sponsor” in Kenyan parlance) even while claiming that he is the father of her unborn child.
The media’s obsessive focus on the murder itself and not on the society that created a Sharon Otieno and an Okoth Obado also leaves a lot to be desired. The public reaction to the murder and the subsequent arrest of the Migori governor – a suspect in the case – have left many perplexed. For instance, Migori residents protested against their governor’s arrest, even after it was revealed that he and his wife might have siphoned millions of shillings from Migori County’s budget for their personal use. Kenyans clearly suffer from Stockholm Syndrome, a condition that causes hostages to develop emotional alliances with their captors (a term that was coined in 1973 when four hostages taken by bank robbers in Stockholm defended those who had held them captive and refused to testify against them.) Kenyans identify with their oppressors to the point where they can no longer see what is in their best interest.
Betrayal and dishonesty have come to define relationships, where all human activity is reduced…to “a form of economic calculation, dismissing love, empathy and care as powerful but unfortunate delusions”.
The debate on the ridiculously punitive taxes being imposed on Kenyans also reflects a society that has become completely captive to politicians. MPs from both sides of the political divide (that is, assuming that we still have two political sides in a post-handshake era) were making the most asinine arguments in favour of the raised taxes, which generally followed this argument: “We have to tighten our belts to pay for development.” I am no economist but even I know that when you suck money out of the economy, individuals and businesses have less money for purchasing goods or for investing. Businesses close down, people lose jobs, and in the end there is less “development” because there are less people who are paying taxes.
In addition, these austerity measures are being imposed at a time when Kenyans are being sold an ambitious and expensive “Big Four” infrastructure and development agenda. Who is the government kidding? There was no discussion or debate (public participation) on how Kenya got to a place where the government is imposing austerity measures on a people who are already over-burdened by the high cost of living and who are already being over-taxed for everything from electricity to books, which were previously zero-rated. Few ask why Kenyan taxpayers have to pay for the irresponsible massive borrowing – from Eurobond to SGR – that the government indulged in the last five years and which has brought us to a place where the government has us by the throat and there is nothing we can do about it.
I recently had a discussion with someone on the comatose state of Kenya’s citizens. When did we stop feeling anything? When did we shut down? Why is it that people in other countries appear more animated and alive? Was it when we realised in 2007/2008 that we were capable of committing mass murder and rape in the name of politicians? Or was in 2013 when Kenyans decided that people indicted for crimes against humanity should lead us? Or maybe it was in March this year when the man in whose name so many people have been killed decided that shaking hands with his opponent was in his personal, rather than the national, interest? Or when Eva Msando, the wife of murdered IEBC official Chris Msando, was appointed on the EPZ board by a government that may have had a hand in the killing of her husband? Or when known crooks in the opposition were given plum jobs in parastatals as a reward for the “handshake”. Or when soldiers deployed to the Westgate mall on 21 September 2013 to handle an Al Shabaab terrorism situation and to save lives ended up looting the mall’s shops instead? Or when Miguna Miguna was denied entry into the country, forced to board a plane and deported like a common criminal? Or when a man who was photographed eating githeri while waiting to vote for President Uhuru Kenyatta last year was given a state award but world-renowned Kenyan athletes who make the country proud were robbed of their allowances and sports gear by government officials during the Rio Olympics? Or maybe it was that time long ago when Kamlesh Pattni, the leading architect of Kenya’s economic decline in the 1990s, was treated like a rock star at a public inquiry, with people even asking him for autographs? (Most of these people, I might add, are avid church- or mosque-goers.) Stockholm syndrome? Dead men and women walking?
It is easy to shut down in Kenya – if we didn’t, we’d go stark raving mad. Blogger Owaahh says Kenyans suffer from unprocessed trauma – because we have not confronted our trauma, we are still not healed. The trauma of the 2007 election and its violent aftermath, the trauma of being led by people who have acquired or inherited wealth through stolen public resources, the trauma of not knowing which bizarre or tragic situation we may have to confront next, the trauma of knowing that many of your friends and family died psychologically and spiritually a long time ago yet no one came to their funeral or wrote an obituary. And because they are emotionally dead or numb, they cannot function like normal human beings.
It is easy to shut down in Kenya – if we didn’t, we’d go stark raving mad.
But how does one confront trauma when we cannot – and are not even allowed to – name it as such? When we are told at every opportunity that this is how life is, grin and bear it. When a preventable tragedy or a corruption scandal elicits a few tweets but does not change society. When a story stating that most of the food we consume in Kenya might be contaminated or poisonous because corrupt cartels allowed it into the country barely makes it to Page 17 of a newspaper but the story of a politician donating millions of ill-gotten shillings to a church makes front-page news.
Joe Khamisi calls us a nation of “looters and grabbers”. In his most recent book by this title, the US-based Kenyan author explains how 50 years of corruption and plunder have made wanton greed and deception the hallmarks of Kenyan political, economic and social life. Those who question this state of affairs are quickly sidelined, made to feel mad, stupid, naïve, irrational, unpatriotic, deranged, losing it.
50 years of corruption and plunder have made wanton greed and deception the hallmarks of Kenyan political, economic and social life. Those who question this state of affairs are quickly sidelined, made to feel mad, stupid, naïve, irrational, unpatriotic, deranged, losing it.
But as Jack Kerouac, author of the semi-autobiographical 1950s novel On the Road wrote: “The only people for me are the mad ones, the ones who are mad to live, mad to talk, mad to be saved, desirous of everything at the same time, the ones who never yawn or say a commonplace thing, but burn, burn, burn like fabulous yellow roman candles exploding like spiders across the stars and in the middle you see the blue centerlight pop and everybody goes ‘Awww’.”
But as Jack Kerouac, author of the…1950s novel, On the Road wrote: “The only people for me are the mad ones, the ones who are mad to live, mad to talk, mad to be saved, desirous of everything at the same time…
It is time for Kenyans to get mad, really mad.
70 Years After the UN’s Declaration on Human Rights, the Struggle Continues Against Poverty, War, Disease – and Whistleblowers
The UN’s internal benchmark of success is the amount of money raised, not the successful execution of a programme. War and poverty remain necessary for the functioning of a system of phantom projects characterised by waste, mismanagement and corruption. And since the Iraq Oil-for-Food scandal of the early 2000s, in which billions went missing and the perpetrators scot-free, senior management has waged a silent war against its own whistleblowers. Who will police the world’s watchdog? By RASNA WARAH
The resignation last month of the Executive Director of the United Nations Environment Programme (UNEP), Erik Solheim, after an internal audit found that he had misused funds from the organisation, has been construed as a sign that the UN is serious about tackling wrongdoing within its ranks. However, this high-profile case should not distract us from the fact that waste, fraud and corruption are rarely punished in the UN system, and that the majority of offenders get away scot-free.
Solheim is accused of spending nearly half a million dollars on unnecessary travel within a period of less than two years. The audit showed that between May 2016 and March 2018 he spent 529 days travelling and only stayed in Nairobi, where UNEP has its headquarters, for about 20 per cent of the time.
Much of this travel was wasteful. For instance, in July 2016, he travelled to Paris for a one-day official meeting but decided to stay on in the French capital for a whole month (at taxpayers’ expense). In the following two months, he travelled for 42 days to 24 destinations. One official trip to Addis Ababa was routed through Oslo in his home country Norway, even though the Ethiopian capital is just a two-hour flight from Nairobi. The audit report also showed that Solheim was not the only culprit – other senior managers at UNEP have been accused of spending a whopping $58.5 million on travel alone over a two-year period – and this, from an organisation that advocates for the reduction in the use of fossil fuels.
Solheim is accused of spending nearly half a million dollars on unnecessary travel in less than two years. Between May 2016 and March 2018 he spent 529 days travelling and only stayed in Nairobi, where UNEP has its headquarters, for 20 percent of the time.
This blatant abuse of taxpayers’ money is not new at the UN and Solheim’s conduct is hardly unique. The differences between Solheim’s case and others are: one, his case managed to reach the internal investigation stage, which only happens when there is political will to carry out such an investigation; two, the findings of the investigation were made public, which is usually not the case; the case against him was strong because the trail of misused funds could be traced through flight and hotel bookings, which is not normally the case when deceptive UN managers make UN money disappear without a trace.
One common way of diverting or stealing funds in the UN is to create phantom projects. Let me give you a personal example. Sometime in 2009, my boss at the United Nations Human Settlements Programme (UN-Habitat) called me into his office to tell me that he urgently needed to spend $100,000 of donor money before the end of the year because if he didn’t, he’d have to return the funds to the donor country. So he appointed me to manage a $100,000 project that would result in a book on cities for which he said he would hire consultants from abroad to research and write such a book. The consultants (some of whom were friends of the boss’s boss) were hired and a phantom book project was created.
Two months later, the book project was “closed” (without my knowledge, yet I was supposedly heading the project) even though no manuscript or book had materialised. When I realised that the project was fake and that money may have been diverted to a personal project, I reported the matter to the project/funds manager (a junior officer, essentially a bookkeeper, who had no say in how money in the organisation was spent and who only followed the instructions of her bosses). There was no response and within hours of my email, the process of eliminating me from the organisation began. I suffered retaliation, threats of non-renewal of contract and a whole range of psychological warfare tactics that eventually made me leave the organisation. I realised then that I had inadvertently become a “whistleblower”.
One common way of diverting or stealing funds in the UN is to create phantom projects. Millions of dollars have disappeared from the UN’s coffers through such opaque practices, the fiddling of books, and even downright theft, but few of the culprits are reprimanded, fired or even identified.
When I eventually took UN-Habitat to task through the UN Ethics Office – which was created in response to the Oil-for-Food debacle in Iraq, and which is mandated to look into whistleblower cases – I was enmeshed in a labyrinth of doublespeak and obfuscation that convinced me that the UN Ethics Office was created to muzzle and suppress whistleblowers so that the UN’s reputation would not be tarnished. I got no support from the office; on the contrary, I was told, both by the Ethics Office and UN-Habitat’s senior bosses, that the whole thing was a figment of my imagination. I have had to live with that “gaslighting” humiliation for the last nine years.
Millions of dollars have disappeared from the UN’s coffers through such opaque practices, the fiddling of books, and even downright theft, but few of the culprits are reprimanded, fired or even identified. (Even Solheim was allowed to quietly resign.) On the contrary, whistleblowers find themselves out of a job or demoted.
For instance, senior UN officials implicated in the scandalous UN Oil-for-Food Programme in Iraq are still walking around freely, enjoying their UN perks and benefits. A 2005 investigation led by Paul Volcker – who was appointed by the then UN Secretary-General Kofi Annan after a series of exposés about money being diverted from the programme appeared in the media – found that billions (yes, billions!) of dollars had been lost through a network that included Saddam Hussein, dubious foreign companies and individuals who paid bribes or received kickbacks to participate in the programme and UN employees who received bribes or chose to look the other way. Not one person identified as having fraudulently benefitted from the programme – it was supposed to help the Iraqi people cope with the sanctions imposed after Saddam invaded Kuwait – has been charged with this crime in any national court. (Saddam Hussein was eventually tried and executed by a kangaroo court, not for diverting funds from the programme, but for crimes he had committed against the Iraqi people.)
Meanwhile, the UN simply noted the findings of the Volcker investigation and UN member states continued with business as usual. Besides, by the time the findings of the Volcker investigation were made public, the United States and Britain, two of the five veto-holding powers in the UN Security Council, were embroiled in an illegal war in Iraq, which diverted the public’s attention from one of the biggest scams the world has ever witnessed.
The Oil-for-Food Programme put a huge dent in the UN’s reputation because of the scale of the theft, but this particular UN-managed initiative only got exposed because there were people within the organisation, such as Michael Soussan, author of Backstabbing for Beginners, and Rehan Mullick, a database manager, who were willing to blow the whistle on wrongdoing within the programme. Many smaller-scale thefts are taking place every day under the noses of UN bosses, and sometimes with their collusion.
The reason why such thefts and cover-ups are so common in the UN is that UN agencies are often deliberately vague about how they spend their money. A NORAD-commissioned investigation in 2011 found that most of the UN agencies surveyed had difficulty explaining where their money had gone or to which specific projects, and that information about expenditure was either limited or fragmented.
The Oil-for-Food Programme put a huge dent in the UN’s reputation because of the scale of the theft, but this particular UN-managed initiative only got exposed because there were people within the organisation, who were willing to blow the whistle on wrongdoing within the programme. Many smaller-scale thefts are taking place every day under the noses of UN bosses, and sometimes with their collusion.
When internal investigations are carried out, it usually means that things have gone out of hand (or that enough people in the organisation are pissed off and are complaining), which is what happened with Solheim at UNEP and also at the UN’s refugee agency in Uganda recently. An internal audit of UNHCR’s operations in Uganda found that the agency wasted tens of millions of dollars in 2017 by overpaying for goods and services, awarding major contracts improperly and failing to prevent fraud and waste. In addition, thousands of blankets, wheelbarrows and solar lamps meant for South Sudanese refugees went missing. The UN agency also entered into inappropriate arrangements with Ugandan government officials. For instance, it paid the Office of the Prime Minister $320,000, ostensibly to buy a plot of land to expand the government’s refugee-handling capacity; yet the Office of the Prime Minister could not produce a title deed to prove ownership and the land is now being used as a parking lot.
Part of the problem is that UN agencies are expected to monitor, evaluate and audit their own programmes and projects – the poacher as game-keeper. Donors to the UN expect the global body to report on the the projects they fund. This is problematic because it means that UN agencies can easily manipulate their monitoring and evaluation reports to suit their own agendas, needs and funding requirements. Besides, success is often measured by how much money was raised and spent, not on whether the project achieved its goals. There is, therefore, a desire to spend large amounts of money in the quickest way possible – even if it means travelling first class to a vague conference in a distant part of the world.
An internal audit of UNHCR’s operations in Uganda found that the agency wasted tens of millions of dollars in 2017…Thousands of blankets, wheelbarrows and solar lamps meant for South Sudanese refugees went missing. The UN agency paid the Office of the Prime Minister $320,000 to buy a plot of land to expand the government’s refugee-handling capacity. Yet the Prime Minister’s office could not produce the title deed to prove ownership. The plot is now a parking lot.
Moreover, a project is not “closed” because it was successful (which should be the ultimate aim of any project); rather, it remains “ongoing” even when the situation on the ground has changed (which explains why there are still UN peacekeepers in Haiti even though the civil conflict there ended years ago). No one wants to know how many people’s lives improved significantly as a result of the project or why the crisis that led to the project keeps recurring.
This explains why, year after year, the UN fabricates or exaggerates a humanitarian crisis in some part of the world. A few years ago it was Somalia; today it is Yemen. No one wonders why, if the UN has been so successful in stemming the scourge of war around the world the refugee crisis today is bigger than it was when the UN was established. To avert a humanitarian crisis in Yemen, would it not have been wiser to sanction Saudi Arabia for going to war with Yemen or to sanction the United States, the main supplier of arms to Saudi Arabia?
But these are the uncomfortable questions that UN bureaucrats – and the power wielders at the UN Security Council – do not worry too much about as they travel in luxury around the world to some god-forsaken country whose people will never be lifted out of misery because the UN will not have it any other way: too many UN jobs depend on people remaining poor, hungry and homeless.
What can be done to reverse this situation? Well, for starters, as the world celebrates the 70th anniversary of the Universal Declaration of Human rights on 10 December, there has to be an honest discussion about whether the UN has fulfilled its mandate of promoting peace, human rights and development around the world. A scorecard would indicate success in some areas (e.g. smallpox eradication and child vaccination programmes) but dismal failures in others (e.g. wars in Iraq, Syria and Yemen and genocides in Rwanda and Srebrenica). If the UN cannot prevent wars and suffering, then what is its purpose?
As the world celebrates the 70th anniversary of the Universal Declaration of Human rights on 10 December, there has to be an honest discussion about whether the UN has fulfilled its mandate of promoting peace, human rights and development around the world.
Secondly, we need to democratise the UN Security Council, which is currently the bastion of only five veto-holding countries – the United States, Britain, France, China and Russia – which also happen to be the world’s leading weapons manufacturers and suppliers and who, therefore, have a vested interest in conflicts outside their borders. These countries decide which countries can go to war and which can’t (which is why no sanctions were imposed on the United States and Britain when they went to war in Iraq). All permanent members of the UN Security Council should have an equal say in matters concerning global security, and should be working towards preventing wars, not starting them.
We need to democratise the UN Security Council, which is currently the bastion of only five veto-holding countries, which also happen to be the world’s leading weapons manufacturers and suppliers and who, therefore, have a vested interest in conflicts outside their borders.
Thirdly, the UN’s internal oversight system needs to be overhauled. The UN’s internal justice systems, including the UN Ethics Office, should be abolished in favour of an external, independent mechanism that can provide the checks and balances that the UN so desperately needs. This mechanism, possibly in the form of a tribunal, would also allow UN whistleblowers to present their cases without fear of retaliation. Such a mechanism would, hopefully, also permit perpetrators of crimes committed by UN personnel to be brought to justice in national courts, rather than the current system that gives immunity to UN employees implicated in crimes and wrongdoing (which means they cannot be tried in any court, not even in their own country).
The UN cannot – and should not be allowed to – police itself. Given all the scandals at the UN, I think it is time an independent entity be entrusted with the responsibility of watching the world’s watchdog.
Fake It till You Make It Nations and Bling Bling Economics: Debt, Dictatorship and Underdevelopment
Once upon a time, financial recklessness was the preserve of resource-rich nations. Now, resource-poor African nations, their thoughtless leaders seduced into taking printed money circulated by the US Federal Reserve after the global financial crisis a decade ago, have become the new sultanates of debt distress. DAVID NDII ponders a different path.
Not too long ago, Angola opened an embassy in Nairobi on a quite well-appointed address on Redhill Road in the diplomatic suburb of Gigiri, a road I use frequently. You couldn’t miss it. It had an outlandish gate and a black granite signboard with gold lettering. I was rather intrigued that Angola would need such a large embassy in Kenya. I have made a point of observing how much activity was going on there— very little. I passed there the other day and lo and behold, the outlandish gold lettered black granite signboard was gone, replaced by a more modest one announcing the Botswana High Commission. The Angolan foray would have cost no less than $10 million, and I would imagine that Kenya was not the only country that Angola had spread its diplomatic footprint. What has changed?
Angola has squandered the oil bonanza of the last decade. Angola is Africa’s second-biggest oil producer after Nigeria, with a daily output of 1.6 million barrels of crude and 18 million cubic metres of natural gas. There is an economic principle that windfall earnings should be saved. Angola did not save. Instead, it leveraged the oil boom to pile up debt. Angola is China’s biggest debtor in Africa, owing US$ 23 billion accounting for about a fifth of Africa’s debt to China.
If Angola had set a windfall benchmark at $50 per barrel, its nest egg for the five and a half year oil boom (April 2009 to May 2014) would have been in the order of $100 billion on crude oil alone ie. excluding natural gas. A conservative investment yielding 5 percent a year would be earning Angola $5 billion a year to invest in infrastructure or whatever else it chooses. This is how Norway got rich on oil. Norway’s sovereign wealth fund, the worlds largest, is now worth a trillion dollars. If Norway was to pay dividends from the fund to its 5.2 million citizens, each would get US$9,000 a year.
There is an economic principle that windfall earnings should be saved. Angola did not save. Instead it leveraged the oil boom to pile up debt. If Angola had set a benchmark of $50 per barrel of petroleum, its windfall for the five and a half year oil boom (April 2009 to May 2014) would have been in the order of $100 billion on crude oil alone… A conservative investment yielding 5 percent a year would be earning Angola $5 billion a year to invest in infrastructure or whatever else it chooses.
They say once bitten twice shy. Not Zambia. When I was a college student eons ago, Zambia was a case study on how not to manage an economy. Zambia rode the post independence commodity boom into middle income status by the early seventies. At $600, Zambia’s income per person was one-third higher than the Sub-sahara Africa average. In Nairobi, Zambia’s heydays are represented by its well-appointed embassy property on Nyerere Road, overlooking Uhuru Park. When commodity prices receded from the late seventies, Zambia plugged its finances by borrowing – and borrowed itself into poverty. Over the next decade, Zambia’s foreign debt increased seven-fold, from one to seven billion dollars. By the mid-90s when it got HIPC (Highly Indebted Poor Countries) debt relief, average income adjusted for inflation was half of the mid-1970s level.
Zambia rode the post independence commodity boom into middle income status by the early seventies. When commodity prices receded from the late 1970s, Zambia plugged its finances by borrowing – and borrowed itself into poverty.
Copper prices surged again in the 2000s peaking in 2011 at $4.60 a pound, about the same in inflation-adjusted terms, as at the 1970s peak. In 2012, against the backdrop of retreating copper prices, Zambia debuted in the Eurobond market, borrowing $750 million. It also borrowed heavily from China. Copper prices have fallen again and Zambia is in debt distress. The eurobonds are now trading at around15 percent yield, almost three times the debut bonds 5.6 percent yield at issue. What this means is that the bonds for which investors paid $94 are now trading at $34. It means that Zambia is now effectively locked out of any more borrowing in the sovereign bond market. Will Zambia turn around its finances before the bonds are due for re-financing? Doubtful.
Zambia is only slightly less dependent on copper now than it was in the 1970s. Copper still accounts for two-thirds of exports. Zambia has no shortage of low-hanging fruit in terms of diversification options: it has plenty of idle arable land and underexploited tourism potential. Chile was once as copper dependent as Zambia. In fact, copper still accounts for half of Chile’s exports. But Chile has diversified its economy and worked its way up to being the first Latin American country to be admitted to the OECD club of rich countries. Interestingly, Chile has become a wealthy country without following the Asian Tiger holy grail of export manufacturing, but rather by diversifying to services and agricultural exports. Its other key exports are agricultural including horticulture, wine and fish, especially farmed salmon.
Chile was once as copper dependent as Zambia. Copper still accounts for half of Chile’s exports. But Chile has diversified its economy and worked its way up to being the first Latin American country to be admitted to the OECD club of rich countries. Interestingly, Chile has become a wealthy country without following the Asian Tiger holy grail of export manufacturing, but rather by diversifying to services and agricultural exports.
Historically, financial recklessness on this scale was the preserve of resource-rich African countries. But the disease has spread all over the continent. Resource-poor countries such as Ethiopia and Kenya are now just as reckless as the resource-cursed. In the past, resource-poor countries simply did not have access to the money to steal or finance megalomania. When they tried to do so by domestic borrowing and printing money, the macroeconomic feedback loop quickly kicked in and wreaked financial havoc. Moi learned this lesson. Mugabe did not. He ended up with a hyperinflation for the ages, and the demise of the Zimbabwe dollar.
There are two reasons why resource-poor countries have also caught the disease: the 2008 global financial crisis, and China.
Since the global financial crisis, which began in 2007 and properly set in the next year, the financial markets have been awash with money churned out by the US Federal Reserve and other central banks, thereby depressing interest rates to near zero, prompting money managers to go looking for better returns in emerging markets in what is known in market lingo as “hunting for yield”. Aggressive salesmen were everywhere scouting for and massaging the egos of potential borrowers. When Kenya set out to debut in the Eurobond market it indicated that it would raise a $500m “benchmarking” bond whose proceeds were to retire a syndicated bank loan borrowed two years before, and which was the only foreign loan in Kenya’s books at the time. By the time the issue was going to the market, it had grown fourfold to $2 billion. By the time it closed, the government had borrowed $2.8 billion.
Within weeks of the successful debut, the treasury mandarins were talking of Sukuks (Islamic bonds) and Samurais (Japanese Yen denominated bonds), like children accidentally locked inside an ice cream parlour. Other than the syndicated loan repayment of $600 million there is no trace of anything financed with the money.
Since the global financial crisis, the financial markets have been awash with money churned out by the US Federal Reserve and other central banks, thereby depressing interest rates to near zero, prompting money managers to go looking for better returns in emerging markets. Aggressive salesmen were everywhere scouting for and massaging the egos of potential borrowers. Africa Rising.
China is getting more than its fair share of flak for Africa’s debt distress. The fear of the Dragon is over the top. Unlike the Western banks and markets which are embedded in the Western power structure, China will have little recourse when countries default. It cannot run them through the mill we saw “the troika” run Greece when it went into debt-distress in 2009. The head of China Export and Credit Insurance Corporation, known as Sinosure was recently quoted lamenting the poor quality of China’s infrastructure loans abroad. He went on to disclose that the agency is already a billion dollars out of pocket on Ethiopia’s new railway, whose preparation he termed “downright inadequate”. “Ethiopia’s planning capabilities are lacking, but even with the help of Sinosure and the lending Chinese bank it was still insufficient.”
It has also been reported that China may offload its infrastructure loans to the secondary market. The plan is to sell the loans to the Hong Kong Mortgage Corporation which will in turn repackage them, dice them up and sell them to investors, thereby releasing liquidity back to the primary lenders such as China Exim Bank to make more loans. This is not funny. First, the lenders admit that they have made dud loans. Then they follow this with an announcement that they will sell the same to investors. It is a scheme such as this, which mixed up low risk and high risk (a.k.a sub-prime) mortgage loans into securities known as Collateralized Debt Obligations (CDOs) that precipitated the erstwhile mentioned global financial crisis. More poignantly, the Dragons debt trap diplomacy as it’s been called, begins to look uncannily like hunting for yield.
That is the supply side. On the demand side, you have African leaders who have no ideas of their own. From import substitution industrialization, to neoliberal orthodoxy in the 80s, to poverty reduction strategies and now infrastructure-led growth, they wander thoughtlessly from one aid paradigm to the next, all the while living up to Fanon’s prediction that they were destined to become “a transmission line between the nation and capitalism.”
The bigger problem is delusions of grandeur. Seemingly every one of these African big men has a Lee Kwan Yew complex. Even Uhuru Kenyatta, a man who couldn’t run an orderly kindergarten in a children’s park if his life depended on it, is prone to bouts of megalomania during which he comically dons military fatigues and goes around doing General Park Chung-hee skits.
On the demand side, you have African leaders who have no ideas of their own. From import substitution industrialization, to neoliberal orthodoxy in the 80s, to poverty reduction strategies and now infrastructure-led growth, they wander thoughtlessly from one aid paradigm to the next, all the while living up to Fanon’s prediction that they were destined to become “a transmission line between the nation and capitalism.
Africa has its economically successful nations: Botswana, Namibia, Mauritius, Cape Verde and the Seychelles. What do these successful African nations have in common? First, they are all small. Three of them are small island nations. Namibia is large geographically, but its population is only 2.5 million people. Second, they are also successful democracies. The five are consistently the highest ranked African countries in democracy league tables such as the Economist’s Democracy Index and the Freedom House Index.
Why are Africa’s small countries more politically and economically successful than the big ones?
Size matters. It is easier to build a small nation than a big one. Small islands are natural nations, hence it should not surprise that all the small island nations are successful. Madagascar is Africa’s sole big island nation, and it is not successful at all.
The big African countries are almost invariably very ethnically diverse. Recently, someone on social media asked me why benevolent dictatorship cannot work in Africa the way it worked in South Korea. My answer was a question: what tribe will the dictator be? He has not responded. Proponents of developmental autocracies fail to recognize that the East Asian countries are old nations, not the arbitrary colonial creations that African countries are. Korea is a culturally homogenous society with unified dynastic rule going back to 900 AD, and a political history, known as the Three Kingdoms, going back another millennium. The Thai Kingdom dates back 700 years.
Proponents of developmental autocracies fail to recognize that the East Asian countries are old nations, not the arbitrary colonial creations that African countries are. Korea is a culturally homogenous society with unified dynastic rule going back to 900 AD, and a political history, known as the Three Kingdoms, going back another millennium. The Thai Kingdom dates back 700 years.
Ethiopia is Africa’s oldest nation-state, and the only one that is not a colonial creation. It is also one of the largest and most diverse(100 million people, over 80 officially recognized ethnic groups). After the Derg’s reign of terror, Ethiopians adopted a constitution based on a loose ethnic federation. But Meles Zenawi could not resist the allure of the developmental autocrat. He borrowed and built like a man possessed but the economic miracle did not materialize, and Ethiopians, tired of autocracy without prosperity, took to the streets. The edifice has unravelled. The leadership is coming to terms with a historical fact that the rest will be reckoning with sooner or later: political development precedes prosperity.
Yoweri Museveni, America’s Great Foot Soldier in East Africa, Is Desperately Seeking a Bail-Out
The conviction in New York of Patrick Ho Chi-ping, a former Hong Kong foreign minister, for allegedly bribing President Museveni and his foreign minister, Sam Kutesa, bring to light the seamy underbelly of the US-China contest over Africa. Museveni has long been the West’s man in East Africa, who jettisoned most of Uganda’s public resources to pursue regional military adventures. But 2018 was the year Ugandans shook off their docility. Confronted by debt and protest, will the old man crack? By MARY SERUMAGA.
It has been a hectic couple of months for the Ministry of Finance and the IMF. Uganda is one of those countries desperately in need of a bailout and November/December saw end-to-end meetings. On the agenda were Uganda’s or President Museveni’s desire to proceed with his legacy projects and the IMF’s objections.
Gone are the days when Uganda was described as the IMF success story, “a virtual textbook of the International Monetary Fund’s structural adjustment program: free markets, a convertible currency, an independent central bank, selling off state-owned companies, tight budget, and downsizing the civil service and the army.” ” ~ Bill Berkeley, Atlantic Monthly
For instance, in 2018 the Central Bank cannot anymore be described as independent as the ongoing Parliamentary investigation in to the sale of four banks under supervision orders shows. The Central Bank belongs to one Justine Bagyenda, former head of Bank Supervision and her unknown handlers. According to leaked bank statements she is a dollar millionaire after 32 years in the civil service.
Gone are the days when Uganda was described as the IMF success story, “a virtual textbook of the International Monetary Fund’s structural adjustment program…For instance, in 2018 the Central Bank cannot anymore be described as independent as the ongoing Parliamentary investigation in to the sale of four banks under supervision orders shows.
Bagyenda is unable to explain to parliament’s Committee on Commissions, Statutory Authorities and State Enterprises (COSASE) why she autonomously and illegally sold a bank under supervision or the basis upon which she discounted bank assets by 93%. She insists she does not remember. Unfortunately, there are no records either because Bagyenda was caught on security cameras one night removing a sack of documents from the bank. Her accomplices (bodyguard, driver and bank security guards) were all remanded in custody but she remains a free woman.
Twenty years after divestment of state enterprises, there has been no report on profits or losses made. Fraud was detected in the sale of the national airline and other assets. The ‘cash budget’ is characterised by massive arrears and supplementary budgets are made throughout the year to overspending ministries. Finally, the civil service has ballooned from 22 ministries (after downsizing) to over 75, plus an additional twenty-nine specialist agencies causing service delivery to suffer.
The IMF and the interests they serve want to do business but also want to interrupt Chinese domination of the territory. They are seizing the moral high ground by accusing China of ‘predatory lending’, ’weaponizing’ capital and holding poor debtor countries to ransom.
20 years after divestment of state enterprises, there has been no report on profits or losses made. Fraud was detected in the sale of the national airline and other assets. The ‘cash budget’ is characterised by massive arrears and supplementary budgets are made throughout the year to overspending ministries. Finally, the civil service has ballooned from 22 ministries (after downsizing) to over 75, plus an additional twenty-nine specialist agencies…
In their letter to the Administration, the senators asked, “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?”
All of this is going on over the heads of the Ugandan people who are not included in the planning and will not be involved in oversight of any transactions. They just want public resources to be used honestly and in the most efficient and effective manner possible. With an upward trend in undernourishment, the introduction of new taxes and announcements scaling back universal primary and secondary education programmes, Ugandan docility is becoming a thing of the past. Although 2018 has been plagued by persistent civil unrest, resistance to state brutality led by the People Power movement is growing.
Turning to the specifics of the various competing interests, President Museveni’s agenda includes building the planned oil pipeline and oil refinery. These require major road construction in the oilfields of Buliisa. Problem number one – there are no funds available to construct the roads and they will need to be borrowed.
The IMF and the interests they serve want to do business but also want to interrupt Chinese domination of the territory.
For the refinery, a partnership with an investor should secure 60% of the cost, but that still leaves 40% to be sourced by the government of Uganda. Similarly the only source is another loan. A proposed partnership in the pipeline would provide 85% of the cost. The remaining 15% would have to be borrowed by government.
All of this is against the background of the energy sector. Isimba and Karuma hydro-electric power plants are complete. The generated power can only be evacuated and distributed among consumers with a huge investment in the necessary infrastructure. At this stage there is no time to begin the long process of cultivating a public private partnership and the entire amount – US$ 3.5 billion – to fund transmission and distribution has to be borrowed. Note that Isimba and Karuma were built with non-concessional loans
Sources state that there are lower-interest, longer term concessional loans available from the UK and Europe, however, Uganda’s ability to repay is compromised by its being over its head in semi-concessional debt to China and domestic banks. Hence the need for an IMF bailout.
Now with the upper hand, the IMF has raised its own concerns the first of which is the sustainability of the public debt.
This is a turnaround from their Debt Sustainability Analysis (DSA) of 2016 in which they pronounced the economy healthy and debt levels manageable, “Government finances remain on a sound footing, though expenditure composition can be of concern.” That conclusion contradicted the Auditor General’s report in which he warned that interest on loans from domestic banks (much higher and repayable in much shorter periods than loans from International Financial Institutions) was approaching unsustainable levels. In 2016 and 2017 he also outlined significant failures in agricultural projects and health service delivery.
There are lower-interest, longer term concessional loans available from the UK and Europe, however, Uganda’s ability to repay is compromised by its being over its head in semi-concessional debt to China and domestic banks. Hence the need for an IMF bailout.
The IMF’s only caveat in the DSA was that for continued debt sustainability a) project selection and implementation would have to be strengthened b) commencement of oil production would have to commence on schedule in 2020. They are not keen on either the pipeline or the refinery as priorities – their priority is debt servicing.
Oil production has now been pushed back to 2023. Uganda discovered oil before Ghana but Ghana has been producing for years. During that time Uganda has been embroiled in legal battles over the sale of concessions. It is very interesting that in the recently concluded trial in which one Patrick Ho was convicted of bribing President Museveni and his foreign minister Sam Kutesa, correspondence revealed that Patrick Ho understood that after he had paid them, the sale of oil concessions would be reversed in order to sell them to China’s CEFC of which Ho was a representative.
Now the IMF is of the view that commercial debt servicing consumes resources that would otherwise be available for development.
They are also concerned about domestic arrears, payments owed to local suppliers, which continue to climb and reached an unpayable US$267 million in 2018. Suppliers of foodstuffs to the police force formed an association and suspended all supplies until their arrears were cleared.
The third barrier to a new IMF package is the high recurrent cost of public administration. Mushrooming local government entities and specialist agencies hived off from their parent ministries has meant in 2018 that many civil servants have been or are yet to be paid in arrears. Service delivery has been characterised by shortages, the most important of which is drug stock-outs. Belatedly, government has resolved to reduce the number of ministries, departments and agencies although action has yet to be taken.
In the recently concluded trial in which one Patrick Ho was convicted of bribing President Museveni and his foreign minister Sam Kutesa, correspondence revealed that Patrick Ho understood that after he had paid them, the sale of oil concessions would be reversed in order to sell them to China’s CEFC of which Ho was a representative.
Supplementary expenditure will be the toughest nut to crack. Expenditure over budget is in direct relation to the political clout of the overspending entity. Predictably State House and the Ministry of Defence are the biggest culprits. State House has been known to exhaust its annual budget in the first quarter of the year, requiring supplementaries that are carved out of the budgets of less powerful votes.
A study by the Alliance for Campaign Finance Monitoring (ACFIM) in 2016 showed that overexpenditure peaks during election periods, it also showed that State House is a serial offender, indications that the government diverts funds from service delivery to election campaigns and regime preservation.
These are the current barriers to a new IMF programme. It is clear that all of Uganda’s economic problems stem from poor governance, in the words of one source, “The problems are not economic but institutional failures, lack of accountability.”
However, although the IMF’s arguments may sound plausible, it would be a mistake to conclude that their interests are one and the same as those of the Ugandan people. An oil refinery would mean a break from the tradition of exporting raw materials, but it is no accident that no serious effort has been made to refine coffee, cotton or any other more easily accessible local produce despite the eternal presence of ‘development partners’. If anything IMF structural adjustment decimated the young local textile industry making the average Ugandan dependent on imported used clothing. It is therefore highly unlikely that they would support Uganda in refining oil when with a little pressure they can get the raw material more cheaply.
Official talk about corruption is diversionary. Museveni and Kutesa have been hawking public assets for three decades with the knowledge of the development partners. It was accepted while the goose continued to lay golden eggs and service already unsustainable Western debt. It is only because those repayments are threatened by Chinese extortion and the growing indignation of the Ugandan polity that the IMF and partners are putting on their ethical investor disguises.
Part of that is to rehabilitate President Museveni’s image if not his character. In December 2018, the month in which the IMF talks were concluded and during which concrete evidence was presented in a New York court proving Museveni and Kutesa had received bribes from Patrick Ho, and during which COSASE revealed the Central Bank to be as corrupt as other public institutions, Ugandans were stunned to wake up to the news that the head of Transparency International had travelled to Uganda and given Museveni an award for ‘fighting corruption’.
Museveni and Kutesa have been hawking public assets for three decades with the full knowledge of development partners. It was acceptable behaviour while the goose continued to lay golden eggs, servicing already unsustainable Western debt. It is only because those repayments are threatened by Chinese extortion and the growing indignation of the Ugandan polity that the IMF and partners are putting on their ethical investor glasses.
At the event, he announced yet another anti-corruption initiative to be unveiled on 10 December. Suspended BRI infrastructure projects and a renewed anti-corruption drive are elements of Kenya’s new SAP programme smuggled in earlier this year.
In 1994, Linda de Hoyos wrote, “In exchange for his handing Uganda back to such entities as Windsor Holdings, Museveni has been given the franchise as the marcher lord for East Africa. While the “social sector” is starved of funds, Museveni has poured millions into the military, his only political base of support.”
It seems although damaged, Museveni is still useful to the West.
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