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Barack Obama and the Corruption of African Leaders

April 5, 2009

To those waiting with fascination to see how Barrack Obama would handle the case of the rampant corruption in Africa; wondering whether he would be bold enough to tell African leaders to their face to tackle corruption, to stop looting the country’s resources and to lift their people out of poverty, he provided the answer on Friday, April 3,2009.

For me, that occasion was the highlight of the invasion of Europe by the Obama juggernaut last week. Obama declared: “My father was from Kenya. And when I travelled to Kenya -- I had just been elected to the United States Senate -- everybody was very excited and they greeted me as if I was already a head of state, and there were people waving and lining the streets. I went to speak at a university and I had to be honest, which was, America has an obligation to provide Kenya help on a whole range of issues, but if Kenya doesn't solve its own corruption problem, then Kenya will never grow. It will never be able to provide for its own”.

Obama was responding to a question from a member of the audience in his Town Hall Meeting in France. The questioner had asked how the G20 Resolution would be extended to help the less developed countries cope with the economic crisis. Obama explained that the developed world promises to “open up our markets to trade from poor countries, but that we will also insist that there is good governance and rule of law, and other critical factors in order to make these countries work”.



He added, “A well-functioning society does not just depend on going to the ballot box. It also means that you're not going to be shaken down by police because the police aren't getting properly paid. It also means that if you want to start a business, you don't have to pay a bribe. I mean, there are a whole host of other factors that people need to -- need to recognize in building a civil society that allows a country to be successful.”

White Western leaders might be sensitive to African feelings when discussing corruption with their leaders. Olusegun Obasanjo intimidated the BBC journalist, Stephen Sackur, to embarrassment when he dared suggest that Obasanjo is corrupt or that his family members are corrupt. Many of my fellow African commentators rushed to Obasanjo’s aid at what they see as a ‘white mans condescension’. But Obama with his black African roots might not have such inhibitions.

Obama has indicated that he wouldn’t balk from the challenge of telling African leaders to their face to tackle corruption, to stop looting the country’s resources and to lift their people out of poverty. Corruption in Kenya is legendary, corruption is worse in Nigeria; Corruption is endemic in the rest of Africa.

But then this corruption is not just done by the dictator who has control of natural resource revenues. The leaders of these corrupt states cannot loot the national coffers without help from the outside world. It takes two to tango. They need companies to pay for the extraction of natural resources, and He needs a bank willing to take the money, they need the banks to stash their loots. Western banks are – directly or indirectly – assisting those who are using the assets of the state to enrich themselves or brutalise their own people.

That is why the most important development from the G20 summit as far as Africa is concerned arguably, is the Resolution to “take action against non-cooperative jurisdictions, including tax havens; to deploy sanctions to protect our public finances and financial systems”.

Yes, the G20 leaders that gathered in London last week promised “to treble resources available to the IMF and to use the additional resources from agreed IMF gold sales for concessional finance for the poorest countries”; Yes, they also agreed that Poor countries should benefit from a $250bn increase in the IMF’s special drawing rights, the fund’s reserve currency, about 7 per cent of which could accrue to Africa. And to make available an additional $850 billion of resources through the global financial institutions to support growth in emerging market and developing countries by helping to finance counter-cyclical spending, bank recapitalisation, infrastructure, trade finance, balance of payments support, debt rollover, and social support”.

But forget those high-sounding declarations, they all sound fantastic on paper. As usual, African leaders are quick to convince themselves that they have emerged from the G20 summit with most of what they wanted. But those pledges are loads of rubbish!

I have never been a fan of the notion that African renaissance would come through development grants from the west. Before the G20 London summit, we have had Gleneagles; Tony Blair’s ‘Commission for Africa was launched with fanfare. And yet those are stories of disappointment and of pledges unfulfilled.

Africa does not need any development grant from Europe in America. In fact I would argue that such grant distorts African economy. The effect of agricultural Aid to Africa would be, at best to drive down food prices and destroy local industries and at worst for African farmers to abandon their farms in favour of hand-outs from Europe. Awoof no de full belle.

In any case, with corruption still rampant, the international Aids end up in the pockets of corrupt leaders and find their way back to European and American banks.

Every in country in Africa is hugely endowed with God- given resources, which natural resources – oil, gas, diamond, gold, copper and timber – are in great demand by the world’s developed and rising economies. The revenue from this Natural resource should lift Africa out of endemic poverty prevalent in the continent.

In 2006 exports of oil and minerals from Africa were worth roughly $249 billion, nearly eight times the value of exported farm products ($32 billion) and nearly six times the value of international aid ($43 billion).

The continent by right should have significant revenues to spend on development. Instead they are impoverished, institutionally corrupt, and prone to violent instability.

The African Kleptocratic elite’s overriding aim is self-enrichment.  The amount of the illicit wealth involved is catastrophic for the continent’s economy. Nigeria is believed to have earned close to $350billion in oil exports over the past forty years and much of that is generally believed to have been mismanaged. A recent UNDP survey and corroborated in a study by Professor Collier of Oxford University, stated that Nigerian nationals have over $107 billion stashed in foreign accounts globally. In Congo, in 2006 oil revenues reached around $3 billion.

This asset stripping is not just an economic crime; its real effect occurs in the social destruction that follows when such vast amounts of capital are siphoned off into overseas private bank accounts.

Nigeria in particular provides the most egregious examples of this ‘resource curse’ in action. In Nigeria It has become a norm in for people enter government house as paupers, at best as average citizens, but leave richer than the country itself, or state or local government as the case may be.

President Olusegun Obasanjo has been a public servant all his life, first a military officer with a splendid career that culminated in his becoming head of state. But does this adequately justify his current financial status? He is the proud owner of many farms, houses, schools including a university.

What of IBB, the famed Maradona. By the time he left office, his house in Minna alone is an insensitive poster for ostentation in a land where millions of people still survive on less than $1 per day. During his tenure, the nation got hefty $12 billion excess cash from the projected price of crude oil courtesy of the Gulf War global oil price surge. Up till now, nobody can account for the money. He, too, is a proud owner of many mansions, business concerns and a private university.

The late General Sani Abacha stashed hundreds of millions of dollars away in foreign banks. He was so rich, he could hardly remember all his bank accounts, where they were and what they were worth. And he was not a businessman or entrepreneur.  He was just a stealth military officer who stole the powers of Nigeria government from Ernest Shonekan.

Today, every governor, Senator or LGA Chairman in Nigeria is a proud owner of at least a house in London, US, Germany or any other country that mattered. It is no big deal. In fact the big deal is if you don’t have one mansion in a choice neighbourhood in any of these countries. Add to that healthy foreign bank accounts and of course another bank, may be vault, inside the comfort of these marble homes.

Dr Bukola Saraki, the present governor of Kwara State has never been known as an entrepreneurial whizkid. Except that he was a director in the badly run and now moribund Societe Generale Bank of Nigeria and later an aide of Obasanjo, he has not done any other big "job". But he owns a £4.35 million (N1.06 billion) mansion on Bourne Street in South West London.

The story of these kleptomaniacs proves one thing though: The leaders of these corrupt states cannot loot the national coffers without help from the international banking system. They need banks where they would stash their money. The state of chaos created by these corrupt leaders in order to maintain their own rule makes their own countries highly unsuitable venues for the safekeeping of their stolen wealth, and so they prefer to keep it offshore, in the banks in London, Zurich and New York.

The loot is also spent in western cities; used to go shopping in Paris, London and Dubai. African wealth is spent on Dolce & Gabbana; at Aubercy Bottier; on shoes at Aubercy and designer handbags at Oxford Street.

Therefore corruption is not just something that happens in developing countries when bribes are paid and money is looted: it is also something that happens in the world’s major financial centres and offshore havens.

What Africa needs is not those unkept pledges for Aid but for the International community to overhaul and strengthen the workings of the Financial Action Task Force (FATF), and the global standard for the anti-money laundering rules that are supposed to prevent flows of corrupt funds.

Whish is why Gordon Browns declaration that “The era of banking secrecy is over” should not be mere rhetoric. The proliferation of jurisdictions offering Safe havens, bank secrecy and confidentiality has done irreparable damage to Africa. The OECD Global Forum against the international standard for exchange of tax information should not be for the purposes of tax information only.

As reported by the Global Witness, international banks do business with African heads of state or their family members, including Barclays, Citibank, Deutsche Bank, and HSBC. They make broad claims about their commitments to social responsibility. But there is a grotesque mismatch between rhetoric and reality. The result is that the international banking system is complicit in helping to perpetuate poverty, corruption, conflict, human suffering and misery.

The G20 summit, resolution that the era of Bank secrecy is over is indication that a global crackdown on tax havens is here. This is the right time to make sure that should be done to prevent banks helping corrupt officials who impoverish their countries.

As the president of the largest economy on earth, Barack Obama and other governments of the world’s major economies must stand up to stop African corruption. They are guilty of hypocrisy if they fail to take responsibility for how their financial institutions and the financial system which they regulate are contributing to corruption and poverty.

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