Connect with us

Politics

Off the Rails: Angola’s SGR Scandal

8 min read.

Over the past 20 years Angola has been bilked of billions of US dollars earmarked for public projects that delivered little or no actual benefit to the country. And an investigation by Maka Angola into a long-promised revamp of the country’s railway system, suggests the government is still being conned into handing over millions of dollars on schemes that fail to materialize.

Published

on

Off the Rails: Angola’s SGR Scandal
Download PDFPrint Article

For two decades under former President dos Santos, Angola repeatedly awarded multi-million-dollar contracts for complex projects to ‘johnny-come-lately’ companies with no track record.  Invariably these were shell companies set up by Dos Santos cronies that never had the wherewithal to deliver on their promises.  It was a scam by which the state kleptocrats diverted public funds into their own bank accounts.  Under reformist President João Lourenço, things are supposed to have changed.  But have they?

An investigation by Maka Angola into a billion-dollar deal for the supply and maintenance of locomotives for the National Institute of Angolan Railways suggests the authorities may need to take a much closer look at what, if anything, they got for their money.

We focus on one of three contracts from May 2015, all signed on the same day on behalf of the Angolan government by the then Secretary of State for Transport, Mário Domingues, and the legal proprietor of AEnergia S.A., Ricardo Filomeno Duarte Leitão Machado, a Portuguese national who owned a 99.9% majority share of the company.

One of these contracts, worth 500 million US dollars, was for the rebuilding, modernization and adaptation of the railway maintenance yards in the cities of Luanda, Lobito, Huambo and Lubango.

In 2013, the Ministry of Transport had signed a Memorandum of Understanding with General Electric to get Angola’s railway system up to date and working again.

For two decades under former President dos Santos, Angola repeatedly awarded multi-million-dollar contracts for complex projects to ‘johnny-come-lately’ companies with no track record

Two years later, AEnergy presented itself as GE’s business partner to draw up and sign three contracts to turn the plans in the Memorandum into reality.  The very next day, AEnergy submitted its invoice for an advance of US $75 million against future works and, surprisingly, the invoice was paid straight away – before any of the required checks and balances had been effected.

The contract contained a stipulation (in Clause 20) that it would only take effect once it had been reviewed and signed off by the Tribunal de Contas (the national audit office) and the Angolan President.  Neither had done so.

AEnergy’s owner, Ricardo Machado, says: “We were advised by the Ministry of Transport that it had submitted the paperwork to the national audit office in good time, in compliance with the legal requirements it was obliged to observe.”

Mr Machado say that the US $75 million received by AEnergy was an advance against expenses: “Bearing in mind the requirements of the entities that were financing the work, the government agreed to make an immediate first payment so as not to delay the process of manufacturing the priority equipment needed for both the new and updated locomotives.”

He says the problem was that financing of the project was due to come from GE Capital (part of the General Electric group) as outlined in the Memorandum of Understanding, but the money was simply not available in 2016 and 2017.  To date, he says, there still hasn’t been funding for the contract to be complete.

But according to Mr Machado Energy “delivered the priority supplies earmarked by Mintrans (the Ministry of Transport) and the value of the services and rolling stock supplied was exactly equal to the amount disbursed.”

Unfortunately the Ministry has no record of any of this.

Where’s the Proof?

A well-informed source as the Ministry of Transport (speaking on condition of anonymity) told Maka Angola that US $75 million could not have been authorised by the Ministry as it didn’t have that money in its budget.  Our source believes that the only possible source of the funds was the Angolan Central Bank, the Banco Nacional de Angola (BNA), whose governor at that time was José Pedro de Morais.

Our source says: “Someone must have given orders to the BNA to pay the US $75 million.  There ought to be documentation to prove who gave the order and on what basis.  Surely if AEnergy had undertaken any contractual work, there would also be records showing how that sum was spent – but we (at the Ministry) have not received any documentary evidence. We simply have no idea what AEnergy did with the money.”

“Furthermore, AEnergy has no justification in citing equipment donated to Angola by General Electric as part of its corporate social responsibility programme as though these were materials purchased by AEnergy with the advance payment.”

“We are talking about mobile medical clinics, training simulators and drones for checking rails; none of these were purchased by AEnergy. None. In fact the Ministry had to order AEnergy logos to be removed from these items because they were donated by GE and had no connection whatsoever with AEnergy.”

Our source has seen nothing to suggest that AEnergy has used any of the US $75 million to make any investment towards infrastructure or training: “Do the math. Then ask yourself: Were we robbed?”

Senior officials at the Ministry of Transport are said to be furious at the lack of any concrete information regarding the project, telling Maka Angola “mislaying just one million dollars would be important, let alone US $75 million, when like every other government institution we desperately need sufficient financial resources.”

In previous years the Ministry could count on a budget of US $1.5 billion for projects – this year its budget is barely US $100 million.  Officials there say the government should conduct an exhaustive audit to recover all the missing millions – that would be a huge boost to investment in essential infrastructure.

Was the Contract Even Legit?

Maka Angola’s legal analyst, Rui Verde, emphasises that the process of entering into a contract with AEnergy was incomplete and that the huge sum handed over to the company was not legally justifiable.

“There is the possibility that this was a criminal act,” he says, “and the authorities should be looking into whether any fraud, peculation or money laundering took place.”

He notes that from a legal perspective it is perplexing that the contract fails to identify the equipment, or works, necessary to remodel and modernize the rail yards.  It gives AEnergy carte blanche to draw up a Plan of Work and make its own decisions about what it is going to do.   “The terminology ‘to remodel and modernize’ is ambiguous and vague and Clauses 3 to 8 in the contract seem to give the private company total discretion over how to spend US $500 million without having to account for it,” says Rui Verde.

“A properly-drawn contract would include a specific Plan of Work, spelling out what equipment is required at each stage.  This had none of the specifics required to guarantee how public money was to be used – it was the equivalent of handing AEnergy US $500 million in a brown envelope and letting them decide what to do with it.”

Senior officials at the Ministry of Transport are said to be furious at the lack of any concrete information regarding the project, telling Maka Angola “mislaying just one million dollars would be important, let alone US $75 million, when like every other government institution we desperately need sufficient financial resources

As Rui Verde reminds us, “this brings to mind a similar scheme already before the courts in which the accused argued they needed the US $500 million upfront as surety to secure a US $30 billion loan.  In fact, there was no loan on offer.”

Was this really another dodgy deal?  In the words of social activist Luaty Beirão, was it just another case of the “embezzlement without end” that was part and parcel of the Dos Santos Administration.  In the meantime Angola is still waiting to find out.

Multi-billion-dollar deals between the government of Angola and the US corporate giant General Electric for showpiece rail and energy infrastructure projects are under investigation after reports of scandalous “irregularities” involving an intermediary company.

As reported by Maka Angola, the projects were all part of a Memorandum of Understanding, signed by GE and the Angolan government in 2013.  Two years later, three separate contracts by which these proposals would be executed were drawn up by Aenergy (Aenergia, S.A.) acting as GE’s intermediary or “channel” partner, whose legal owner is Ricardo Leitão Machado, a Portuguese national.

This was how the former Angolan administration did business with the world.  Under President José Eduardo dos Santos, foreign investors and businesses were required to enter into partnership with the Angolan private sector.  All too often, these were companies with nominal owners shielding the involvement of politically exposed persons whose primary goal was to divert Angolan public funds into their private bank accounts.

The Railway Network Deal

Maka Angola reported concerns over the first of those deals: a contract signed with Angola’s Transport Ministry for the modernisation of the Angolan railway system.  The project was supposed to be fully funded by a loan from a GE subsidiary, GE Capital, yet the Ministry of Finance coughed up (without prior approval) US $75 million US upfront to Aenergy, with little to show for it several years down the line.

Exercizing its right to reply, a lengthy statement from Aenergy (via PR firm Hill+Knowlton Strategies) says that all its actions in connection with that contract were legal and transparent and that the 20% of costs not covered under the deal with GE were due to logistics and import costs.

Angola’s Transport Ministry has a different opinion.

The Electricity Turbine Deal

This investigation looked in detail at another of those contracts with Aenergy from May 2015, in this instance with the Angolan Ministry of Water and Energy, by which GE would provide turbines for hydroelectric projects in Angola, also to be financed by GE Capital.

Allegedly, a version of the Aenergy contract suggests GE Capital’s U$1.1 billion would cover the cost of 8 GE turbines. In fact, GE supplied additional turbines but somehow the Ministry says it was persuaded by Aenergy’s legal owner, Ricardo Leitão Machado, that the surplus turbines had no connection with their deal.

As Angola’s increased needs for energy in the regions became clearer, by 2018 Energy Minister João Baptista Borges submitted a proposal to President João Lourenço that Angola revise its requirements to increase capacity for Lubango (in the central highland province of the same name), Dundo (in the Northeastern province of Lunda Norte) and Tômbwa (on the coast of Namibe province.  He argued they could achieve this with just four extra turbines, by reducing the turbine capacity for the Soyo I power station (in Northwestern Zaire province), thus remaining within the budget agreed with GE Capital.

When this was put to Aenergy and GE at a meeting in December 2018, there was uproar.  Aenergy was set to sell an extra four turbines on to the Angolans, for more than US $120 million, but the GE Angola representatives were adamant that the additional turbines were already included in the deal, as confirmed in writing by GE’s regional executive director, Elisee Sezan.

In short, GE had funded and supplied 12 turbines to Angola; Aenergy had supplied only eight of them while asking the Ministry to pay again for the extra four.

This investigation looked in detail at another of those contracts with Aenergy from May 2015, in this instance with the Angolan Ministry of Water and Energy, by which GE would provide turbines for hydroelectric projects in Angola, also to be financed by GE Capital.

Within days the Energy Minister sent a written report to President Lourenço (dated December 18, 2018) citing a breach of trust and no confidence in Aenergy.  From that date onward, Angola began the process of extricating itself from its contractual obligations to Aenergy to deal directly with General Electric (as arguably should have been the case from the very start). On completion of the audit of their contractual relationship, Aenergy was found to owe Angola close to US $118 million.

President Lourenço was finally able to issue a decree authorizing the revocation of the contracts with Aenergy on the grounds of “violation of the principles of trust and good faith” in August 2019 and the following month a detailed dossier was sent to the office of the Attorney-General of the Republic, to launch a criminal investigation and request the seizure of the as yet undelivered turbines.  On December 6, 2019, the Provincial Court of Luanda ordered the seizure of equipments in possession of Aenergy, worth US $114.2 million, all of which had been acquired with public funds.

It was only to be expected that Aenergy would react and launch an appeal against the Ministry’s injunction and for now the ponderous legal process is in course.  One more mess, left by the Dos Santos kleptocracy, for which the Angolan people pay the price.

This article was originally published by our partner MAKA Angola.

Support The Elephant.

The Elephant is helping to build a truly public platform, while producing consistent, quality investigations, opinions and analysis. The Elephant cannot survive and grow without your participation. Now, more than ever, it is vital for The Elephant to reach as many people as possible.

Your support helps protect The Elephant's independence and it means we can continue keeping the democratic space free, open and robust. Every contribution, however big or small, is so valuable for our collective future.

By

Marques de Morais, Angola’s leading anti-corruption advocate, is winner of the Allard Law School 2015 Prize for International Integrity and the Transparency International Integrity Prize.

Politics

Moving, or Changing?

The purpose of the mass and civilizational migrations of Western Europe was the same as now: not simply to move from one point to another, but also from one type of social status to another, to change one’s social standing in relation to the country of origin.

Published

on

Moving, or Changing?
Download PDFPrint Article

Do we move to change, or do we move to stay the same?

That seems to depend on who we were, to begin with. In most cases, it seems we move in an attempt to become even more of whatever we think we are.

A good Kenyan friend of mine once (deliberately) caused great offense in a Nairobi nightspot encounter with a group of Ugandans he came across seated at a table. There were six or seven of them, all clearly not just from the same country, but from the same part of the country.

“It always amazes me,” he said looking over their Western Uganda features, “how people will travel separately for thousands of miles only to meet up so as to recreate their villages.

He moved along quickly.

“Most African Migration Remains Intraregional” is a headline on the Africa Centre for Strategic Studies website:

Most African migration remains on the continent, continuing a long-established pattern. Around 21 million documented Africans live in another African country, a figure that is likely an undercount given that many African countries do not track migration. Urban areas in Nigeria, South Africa, and Egypt are the main destinations for this inter-African migration, reflecting the relative economic dynamism of these locales.

Among African migrants who have moved off the continent, some 11 million live in Europe, almost 5 million in the Middle East, and more than 3 million in America.

More Africans may be on the move now than at any time since the end of enslavement, or perhaps the two large European wars. Even within the African continent itself. They navigate hostilities in the cause of movement—war, poverty and environmental collapse.

The last 500 years have seen the greatest expression of the idea of migration for the purpose of staying the same (or shall we say, becoming even more of what one is). The world has been transformed by the movement of European peoples, who have left a very visible cultural-linguistic stamp on virtually all corners of the earth. It is rarely properly understood as a form of migration.

It took place in three forms. The first was a search for riches by late feudal Western European states, in a bid to solve their huge public debts, and also enrich the nobility. This was the era of state-sponsored piracy and wars of aggression for plunder against indigenous peoples. The second form was the migration of indentured Europeans to newly conquered colonial spaces. The third was the arrival of refugees fleeing persecution borne of feudal and industrial poverty, which often took religious overtones.

Certainly, new spaces often create new opportunities, but only if the migrants concerned are allowed to explore the fullness of their humanity and creativity. The historical record shows that some humans have done this at the expense of other humans.

A key story of the world today seems to be the story of how those that gained from the mass and civilizational migrations of Western Europe outwards remain determined to keep the world organised in a way that enables them to hold on to those gains at the expense of the places to which they have migrated.

We can understand the invention and development of the modern passport—or at least its modern application—as an earlier expression of that. Originally, passports were akin to visas, issued by authorities at a traveler’s intended destination as permission to move through the territory. However, as described by Giulia Pines in National Geographic, established in 1920 by the League of Nations, “a Western-centric organization trying to get a handle on a post-war world”, the current passport regime “was almost destined to be an object of freedom for the advantaged, and a burden for others”. Today the dominant immigration models (certainly from Europe) seem based around the idea of a fortress designed to keep people out, while allowing those keeping the people out to go into other places at will, and with privilege, to take out what they want.

Certainly, new spaces often create new opportunities, but only if the migrants concerned are allowed to explore the fullness of their humanity and creativity.

For me, the greatest contemporary expression of “migration as continuity” has to be the Five Eyes partnership. This was an information-sharing project based on a series of satellites owned by the United States, the United Kingdom, Australia, New Zealand and Canada. Its original name was “Echelon”, and it has grown to function as a space-based listening system, spying on telecommunications on a global scale – basically, space-based phone tapping.

All the countries concerned are the direct products of the global migration and settlement of specifically ethnic English Europeans throughout the so-called New World, plus their country of origin. The method of their settlement are now well known: genocide and all that this implies. The Five Eyes project represents their banding together to protect the gains of their global ethnic settlement project.

In the United States, many families that have become prominent in public life have a history rooted, at least in part, in the stories of immigrants. The Kennedys, who produced first an Ambassador to the United Kingdom, and then through his sons and grandsons, a president, an attorney general, and a few senators, made their fortune as part of a gang of Irish immigrants to America involved in the smuggling of illicit alcohol in the period when the alcohol trade was illegal in the United States.

Recent United States president Donald Trump is descended from a German grandfather who, having arrived in 1880s America as a teenage barber, went on to make money as a land forger, casino operator and brothel keeper. Franklin Delano Roosevelt, the 32nd president of the United States was the paternal grandson of a trader named Warren, a descendant of Dutch settlers who made his fortune smuggling opium into China in the 1890s.

While it is true that the entire story of how Europeans came to be settled in all the Americas is technically a story of criminality, whether referred to as such or not, the essential point here is that many of the ancestors of these now prominent Americans would not have passed the very same visa application requirements that they impose on present-day applicants.

The purpose of migrations then was the same as it is now: not simply to move from one point to another, but also from one type of social status to another. It was about finding wealth, and through that, buying a respectability that had not been accessible in the country of origin. So, the point of migration was in a sense, not to migrate, but to change one’s social standing.

And once that new situation has been established, then all that is left is to build a defensive ring around that new status. So, previously criminal American families use the proceeds of their crime to build large mansions, and fill the rooms with antiques and heirlooms, and seek the respectability (not to mention business opportunities) of public office.

Many of the ancestors of these now prominent Americans would not have passed the very same visa application requirements that they put to present-day applicants.

European countries that became rich through the plunder of what they now call the “developing world”, build immigration measures designed to keep brown people out while allowing the money keep coming in. They build large cities, monuments and museums, and also rewrote their histories just as the formerly criminal families have done.

Thus the powers that created a world built on migration cannot be taken seriously when they complain about present-day migration.

Migration is as much about the “here” you started from, as it about the “there” you are headed to. It is not about assimilating difference; it is about trying to keep the “here” unchanged, and then to re-allocate ourselves a new place in that old sameness. This is why we go “there”.

This may explain the “old-new” names so common to the mass European migration experience. They carry the names of their origins, and impose them on the new places. Sometimes, they add the word “New” before the old name, and use migrant-settler phrases like “the old country”, “back east”. They then seek to choose a new place to occupy in the old world they seek to recreate, that they could not occupy in the old world itself. But as long as the native still exists, then the settler remains a migrant. And the settler state remains a migrant project.

To recreate the old world, while creating a new place for themselves in it, , such migrants also strive to make the spaces adapt to this new understanding of their presence that they now seek to make real.

I once witness a most ridiculous fight between three Ugandan immigrants in the UK. It took place on the landing of the social housing apartment of two of them, man and wife, against the third, until that moment, their intended house guest. As his contribution to their household, the guest had offered to bring a small refrigerator he owned. However, when the two men went to collect the fridge in a small hired van, the driver explained that traffic laws did not permit both to ride up front with him – one would have to ride in the back with the fridge. The fridge owner, knowing the route better, was nominated to sit up front, to which his friend took great and immediate exception; he certainly had not migrated to London to be consigned to the back of a van like a piece of cargo. After making his way home via public means, and discussing his humiliation with his good wife, the arrangement was called off – occasioning a bitter confrontation with the bewildered would-be guest.

There must have been so many understandings of the meaning of their migration to Britain, but like the Europeans of the New World, the Ugandans had settled on replicating the worst of what they were running from in an attempt to become what they were never going to be allowed to be back home.

A good case in point is the ethnic Irish communities in Boston and New York, whose new-found whiteness—having escaped desperate poverty, oppression and famine under British colonial rule on what were often referred to as “coffin ships” —saw them create some of the most racist and brutal police forces on the East Coast. They did not just migrate physically; they did so socially and economically as well.

It starts even with naming.

The word “migrant” seems to belong more to certain races than to others, although that also changes. When non-white, normally poor people are on the move, they can get labeled all sorts of things: refugees, economic migrants, immigrants, illegals, encroachments, wetbacks and the like.

With white-skinned people, the language was often different. Top of the linguistic league is the word “expatriate”, to refer to any number of European-origin people moving to, or through, or settling in, especially Africa.

According to news reports, some seven million Ukrainians fleeing the Russian invasion were absorbed by their neighboring European countries, most of which are members of the European Union. Another 8 million remain displaced within the war-torn country.

This is an outcome of which the Europeans are proud. They have even emphasized how the racial and cultural similarities between themselves and the Ukrainian refugees have made the process easier, if not a little obligatory.

This sparked off a storm of commentary in which comparisons were made with the troubles earlier sets of refugees (especially from the Middle East and Afghanistan) faced as the fled their own wars and tried to enter Western Europe.

And the greatest irony is that the worst treatment they received en-route was often in the countries of Eastern Europe.

Many European media houses were most explicit in expressing their shock that a war was taking place in Europe (they thought they were now beyond such things), and in supporting the position that the “white Christian” refugees from Ukraine should be welcomed with open arms, unlike the Afghans, Iraqis and Syrians before them.

Human migration was not always like this.

Pythagoras (570-495 BC), the scholar from Ancient Greece, is far less well remembered as a migrant and yet his development as a thinker is attributable to the 22 or so years he spent as a student and researcher in Ancient Egypt. The same applies to Plato, who spent13 years in Egypt.

There is not that much evidence to suggest that Pythagoras failed to explain where he got all his learning from. If anything, he seems to have been quite open in his own writing about his experiences, first as an apprentice and later a fellow scholar in the Egyptian knowledge systems. The racial make-up of Ancient Egypt, and its implications, was far from becoming the political battleground it is today.

Top of the linguistic league is the word “expatriate” to refer to any number of European-origin people moving to, or through, or settling in, especially Africa.

Classic migration was about fitting in. Colonial migration demands that the new space adapt to accommodate the migrant. The idea of migrants and modern migration needs to be looked at again from its proper wider 500-year perspective. People of European descent, with their record of having scattered and forcibly imposed themselves all over the world, should be the last people to express anxieties about immigrants and migration.

With climate change, pandemic cycles, and the economic collapse of the west in full swing, we should also focus on the future of migration. As was with the case for Europeans some two to three hundred years ago, life in Europe is becoming rapidly unlivable for the ordinary European. The combination of the health crisis, the energy crisis, the overall financial crisis and now a stubborn war, suggests that we may be on the threshold of a new wave of migration of poor Europeans, as they seek cheaper places to live.

The advantages to them are many. Large areas of the south of the planet are dominated physically, financially and culturally, by some level of Western values, certainly at a structural level. Just think how many countries in the world use the Greco-Latin origin word “police” to describe law enforcement. These southern spaces have already been sufficiently Westernized to enable a Westerner to live in them without too much of a cultural adjustment on their part. The Westerners are coming back.

This article is part of a series on migration and displacement in and from Africa, co-produced by the Elephant and the Heinrich Boll Foundation’s African Migration Hub, which is housed at its new Horn of Africa Office in Nairobi.

Continue Reading

Politics

The Iron Grip of the International Monetary System: CFA Franc, Hyper-Imperial Economies and the Democratization of Money

Cameroonian economist Joseph Tchundjang Pouemi died in 1984, either poisoned or by suicide. His ideas about the international monetary system and the CFA franc are worth revisiting.

Published

on

The Iron Grip of the International Monetary System: CFA Franc, Hyper-Imperial Economies and the Democratization of Money
Download PDFPrint Article

Despite being one of Africa’s greatest economists, Joseph Tchundjang Pouemi is little known outside Francophone intellectual circles. Writing in the 1970s, he offered a stinging rebuke of orthodox monetary theory and policy from an African perspective that remains relevant decades later. Especially powerful are his criticisms of the international monetary system and the CFA franc, the regional currency in West and Central Africa that has historically been pegged to the French currency—at first the franc, and now the euro.

Pouemi was born on November 13th, 1937, to a Bamiléké family in Bangoua, a village in western Cameroon. After obtaining his baccalaureate and working as a primary school teacher, Pouemi moved to France in 1960, where he studied law, mathematics, and economics at the University of Clermont-Ferrand. Pouemi then worked as a university professor and policy adviser in Cameroon and Cote d’Ivoire. In 1977, he joined the IMF but quit soon after, vehemently disagreeing with its policies. He returned to Cameroon and published his magnum opus, Money, Servitude, and Freedom, in 1980. The recently elected president of Cameroon, Paul Biya, appointed Pouemi head of the University of Douala in August 1983—then fired him a year later. On December 27th, 1984, Pouemi was found dead of an apparent suicide in a hotel room. Some of his friends and students argue he was poisoned by the Biya regime (which still governs Cameroon), while others believe that harassment by Biya’s cronies drove Pouemi to suicide.

International Monetary System

Writing in the turbulent 1970s after the breakdown of the Bretton Woods regime of fixed exchange rates, Pouemi anticipated the three “fundamental flaws” with the international monetary “non-system”: one, using a national currency, the US dollar, as global currency; two, placing the burden of adjustment exclusively on deficit nations; and, three, the “inequity bias” of the foreign reserve system, which makes it a form of “reverse aid.” All three issues have been highlighted by the economic impact of the COVID-19 pandemic.

Long recognized as a problem, the challenges with using the US dollar as the world’s currency have once again become apparent. Low- and middle-income countries (which include essentially all African countries) have to deal with the vicissitudes of the global financial cycles emanating from the center of the global capitalist system. As the Federal Reserve raises interest rates to combat inflation by engineering a recession—because if borrowing costs rise, people have less money to spend and prices will decrease—they are increasing the debt burden of African governments that have variable-rate loans in US dollars. Already, the World Bank has warned of a looming debt crisis and the potential for another “lost decade” like the 1980s. Moreover, higher interest rates in the US lead to the depreciation of African currencies, making imports more expensive and leading to even higher food and oil prices across the continent.

Pouemi viewed the IMF’s attempt to create a global currency through the 1969 establishment of the special drawing rights (SDR) system as an inadequate response to the problems created by using the US dollar. The issuance of SDRs essentially drops money from the sky into the savings accounts of governments around the world. The IMF has only issued SDRs four times in its history, most recently in August 2021 in response to the COVID-19 pandemic. With African governments dealing with falling export earnings and the need to import greater amounts of personal protective equipment—and, eventually, vaccines—there was a clear need to bolster their savings, i.e., foreign reserves. The problem is that the current formula for allocating SDRs provides 60% of them to the richest countries—countries that do not need them, since they can and have borrowed in their own currencies. Of the new 456 billion SDR (approximately US$650 billion), the entire African continent received only 5% (about US$33 billion).

Decades ago, Pouemi had slammed SDRs as “arbitrary in three respects: the determination of their volume, their allocation and the calculation of their value.” Instead, Pouemi advocated for a truly global currency, one that could be issued by a global central bank in response to global recessions and that prioritized financing for the poorest countries. Such a reorientation of SDRs could provide a way of repaying African nations for colonialism and climate change.

Secondly, unable to get the financing they need, African governments with balance-of-payments deficits (when more money leaves a country than enters in a given year) have no choice but to shrink their economies. Pouemi strongly criticized the IMF, which he dubbed the “Instant Misery Fund” for applying the same “stereotypical, invariable remedies: reduce public expenditures, limit credit, do not subsidize nationalized enterprises” regardless of the source of a country’s deficits. Devaluing the currency is unlikely to work for small countries that are price takers in world markets and instead improves the trade balance by lowering domestic spending. The IMF has become “a veritable policeman to repress governments that attempt to offer their countries a minimum of welfare.” The current international monetary non-system then creates a global “deflationary bias,” since those countries with balance-of-payments deficits must reduce their spending, while those with large surpluses—like Germany, China, Japan, and the Netherlands—face little pressure to decrease their surpluses by spending more.

The third major issue with the current international monetary non-system is that developing countries have to accumulate foreign exchange reserves denominated in “hard” currencies like US dollars and euros, which means they are forced to transfer real resources to richer countries in return for financial assets—mere IOUs. Pouemi claimed that “if the international monetary system was not ‘rigged,’ reserves would be held as other goods like coffee or cocoa, gold for example. But the system is ‘rigged’; coffee reserves are quantified as dollars, pound sterling or non-convertible francs.” Instead, in the late 1970s, governments like that of Rwanda effectively lent coffee to the United States by using export earnings to purchase US treasury bills, whose real value was being quickly eroded by high inflation in the US. Hence, we live in a world where developing countries like China and Brazil lend money to rich governments like that of the US. As Pouemi explains: “The logic of the international monetary system wants the poor to lend to—what am I saying—give to the rich.”

CFA franc

Pouemi was also a harsh critic of the CFA franc, since maintaining the fixed exchange rate to the euro implies abandoning an autonomous monetary policy and the need to restrict commercial bank credit. Pouemi also argued that the potential benefits and costs of currency unions are different for rich and poor countries, and that therefore it is inappropriate to analyze African monetary unions through a European lens. His thoughts are especially relevant at a moment when the future of the CFA franc and West African monetary integration are up for debate.

In theory, by fixing the exchange rate to the euro, the two regional central banks that issue the CFA franc—the Banque centrale des états de l’Afrique de l’ouest (Central Bank of West African States) and the Banque centrale des états de l’Afrique centrale (Central Bank of Central African States)—have relinquished monetary policy autonomy. They have to mimic the European Central Bank’s policy rates instead of setting interest rates that reflect economic conditions in the CFA zone. The amount of CFA francs in circulation is also limited by the amount of foreign reserves each regional central bank holds in euros. Therefore, “the solidity of the CFA franc is based on restricting M [the money supply], a restriction not desired by the states, but one proceeding from the very architecture of the zone.” As a result, the economies of the CFA franc zone are starved of credit, especially farmers and small businesses, hindering growth and development. In Pouemi’s words, “There is no doubt, the CFA remains fundamentally a currency of the colonial type.”

When discussing the possibilities for a single currency for the Economic Community of West African States (ECOWAS), Pouemi stressed that the potential benefits and costs of currency union are different for rich and poor countries. “There is not only a difference of perception of the mechanisms of cooperation” between Europe and Africa, “there’s a difference of the conception of common life. Economic cooperation as it is conceived in the industrialized West is the Kennedy Round, North-South dialogue, the EEC, etc.—in other words, essentially ‘customs disarmament’ or common defense; armament is the rule, disarmament the exception.” In Africa, however, economic cooperation is a positive-sum game. Conventional economic theory argues against monetary integration among African countries, since they trade little with each other. But to Pouemi, the goal of monetary integration is precisely to get these countries to trade more with one another. He also questions the view that monetary integration should come last, following the same sequence as the European Union from free trade zone to customs union to common market and, finally, to currency union. “This view is not only imaginary, it is practically non-verified; we have seen examples. Theoretically, it is indefensible: a 10% decrease in tariffs could be … offset by a devaluation of 10%.”

Pouemi also dismissed arguments that Nigeria would dominate the proposed ECOWAS single currency as another example of the classic colonialist tactic of “divide and conquer.” While he acknowledged that “monetary union between unequal partners poses problems,” these are “only problems, open to solutions.” They do not make monetary integration unviable. Such integration need not limit sovereignty. In a regional or continental African monetary union, no “currency would be the reserve of others. Each country would have its own central bank, free to conduct the policy that best suits the directives judged necessary by the government. The only loss of sovereignty following such a union would be the respect of the collective balance. It would not be appropriated by anyone; it would be at the service of all. It would be, for that matter, less a loss of sovereignty than the collective discipline necessary to all communal life.”

Pouemi advocated for an African monetary union with fixed exchange rates between members, the pooling of foreign reserves, and a common unit of account—like the European Currency Unit that preceded the euro. He thought that the debate over whether the CFA franc is overvalued is misguided, since there is no a priori reason for its members to have the same exchange rate. Fixed but adjustable exchange rates—as in the Bretton Woods system or European Monetary System—would allow each nation greater monetary and exchange rate policy autonomy. Settling payments using a common unit of account instead of foreign exchange reserves would help economize on the latter. Moving toward the free movement of capital, goods and labor—as envisioned by the African Continental Free Trade Area—would help diffuse shocks through the monetary union. Finally, such a union would need to have a common policy on capital controls or at least collective supervision of international capital flows.

As Pouemi so eloquently lamented: “History will hold on to the fact that all of [Africa’s] children that have tried to make her respected have perished, one after the other, by African hands, without having the time to serve her.” We do not know what Pouemi could have accomplished had he had the time to serve Africa for longer. All we can do is heed his call that “in Africa, money needs to stop being the domain of a small number of ‘specialists’ pretending to be magicians.”

This post is from a partnership between Africa Is a Country and The Elephant. We will be publishing a series of posts from their site once a week.

Continue Reading

Politics

The Post-colonial Kenyan State: The Thorn in Our Flesh

The lesson from political economist Rok Ajulu’s academic work and activism: it’s not enough to change the “tenants,” but fight to change both the “state” and all of its houses.

Published

on

The Post Colonial Kenyan State: The Thorn in Our Flesh
Download PDFPrint Article

In early May 2022, with almost three months to the August election, Kenya had close to 50 presidential candidates, and 5,000 people running for the 1,500 Member of County Assembly (MCA) positions. Ultimately, not all of these aspirants will be cleared by the Independent Electoral and Boundaries Commission (IEBC) (more like “blunder commission” judging from the 2017 elections and its lack of preparedness for the August 2022 poll), but the question remains—one that the political economist, Rok Ajulu, asked in his 2021 book Post-Colonial Kenya: The Rise of an Authoritarian and Predatory State: what is it about the post-colonial state in Africa that makes so many people want to control it?

In this impressive compendium, Ajulu chronologically and exhaustively mapped out the authoritarian turns of the Kenyan post-colonial state. In doing so, he documented the predatory nature of the colonial regime and how three successive African governments— headed respectively by Jomo Kenyatta, Daniel Arap Moi and Mwai Kibaki—have built on this legacy and, in addition, weaponized ethnicity at specific junctures to consolidate control and accumulation. And not just any accumulation: predatory and parasitic hoarding—in the sum of trillions of dollars and with many detrimental effects for the population—that is only possible when steered, despite declarations to the contrary from the top.

While he charts the oscillating, often moderate and neo-imperial allegiances of actors such as Jomo Kenyatta (the late father of outgoing president, Uhuru), Tom Mboya and Moi—none of whom were great fans of the Mau Mau—Ajulu’s focus is on how the state “becomes brazenly the instrument of the dominant political elite. This type of regime gravitates towards authoritarian dispensation of power precisely because economic mobility and expansion of the new elite is largely tied to their continued control of state-power.”

This thesis, while not unique to Ajulu and recognized in everyday discourse, is anchored here in a prolific and comprehensive archive, which also makes evident, as does the author, that the predatory pursuits of politicians are not unencumbered, even against the heavy-handed authoritarian implements (read political assassinations, state sanctioned ethnic clashes) they use to entrench them. Although Ajulu does not dwell on protests or resistances  to this authoritarian rule over four decades(please read this powerful book by Maina wa Kinyatti for that), and focuses primarily on party politics and the trajectories of (in)famous politicians to narrate the incremental creation of an authoritarian state in Kenya, the constant tug and pull of class tensions and the heterogeneous actions of supposedly homogeneous ethnic populations are always on the horizon.

Who is this man Rok Ajulu? In the short film about him called Breakfast in Kisumu, his daughter, the filmmaker Rebecca Achieng Ajulu-Bushell, documents his academic and political labors dating to his exile from Kenya in the early 1970s. Oriented around interviews she had with him—and it is his narrations that piece together the diverse landscapes that are the visuals for this film (we actually, interestingly, barely see Ajulu)—his voice takes us through his life as a student, political activist  and academic, in a journey that spans Bulgaria, Lesotho, the UK and South Africa. The evocative images of these countries where Rok Ajulu lived, while recent, anchor this narrative that accounts for a life of political praxes in academia and beyond. Though his sojourns mainly pivot around academic pursuits, we also hear about his labors as an agricultural worker in Bulgaria, a pirate taxi driver in Fulham, London and, importantly, as an organizer with the Committee for Action and Solidarity for Southern African Students (CASSAS) while at the National University of Lesotho in the late 1970s and early 1980s (for this work he was imprisoned for three weeks).

It is, perhaps, this period as an anti-apartheid organizer in Lesotho that created the path to a life in South Africa from 1994. Here he taught at Rhodes University and married Lindiwe Sisulu, the current Minister of Tourism (and one of the aspirants vying to succeed Cyril Ramaphosa as South Africa’s next president), and daughter of renowned anti-apartheid activists Walter and Albertina Sisulu. Consequently, it is in South Africa, rather than Kenya, where his influence was more extensive, even as Kenya appears to have been the primary focus of his academic scholarship.

Ajulu-Bushell’s poetic film demonstrates that her father’s life was not ordinary. But it is perhaps the internationalist and pan-African paths he chose that led her to recognize him, as she does in this film, as a “father” but not a “parent.” Her bid to understand her father’s life as an adult and, simultaneously, to document his political praxes, appear to be what has prompted this documentary. While the style of the film may not be for everyone—there are a few seemingly gratuitous appearances of the filmmaker—Breakfast in Kisumu is an important tribute to a father, and one who is representative of a generation who endured many unanticipated and painful exiles for nations and lands which did not always claim them, but for which they gave their lives.

As the final book Ajulu wrote before he died of cancer in 2016, Post-Colonial Kenya: The Rise of an Authoritarian and Predatory State is informed by questions that, likely, the author grappled with throughout his life.

Against the impending 2022 Kenya general elections that are not cause for much inspiration —with the male dominated alliances, handshakes, intrigues and elite contestations that characterize it—Ajulu’s thesis still rings true: that the state is the primary vehicle for accumulation and thus engenders a predatory authoritarianism by those who want to control it.

After years in an exile(s) documented by Ajulu-Bushell’s film, I’m not sure how optimistic Ajulu was for our Kenyan future, for he wrote in his final book: “Besides the change of tenants at the state house, not much really changed. The mandarins who used to lord it over the hapless rank and file remained in their same old places.”

At the very least, this generation can turn to the histories Rok Ajulu has documented in his book, as well as those he lived, to reflect on how, for this election and the next, we are not just going to change the “tenants,” but will fight to change both the “state” and all of its houses.

This post is from a partnership between Africa Is a Country and The Elephant. We will be publishing a series of posts from their site once a week.

Continue Reading

Trending