LÃ©once Ndikumana: To reduce poverty, Africa needs to demand financial transparency as big banks
collude with local corruption
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay, coming to you from Baltimore.
In a recent paper, LÃ©once Ndikumana, a professor and academic at the University of Massachusetts in Amherst, wrote about the war against offshore finance and talks about the need for African development to be sovereign, for Africa to control its own resources and to wage a battle against international banking.
Now joining us to talk about all of this is LÃ©once. He joins us from the PERI institute in Amherst, Massachusetts. Thanks for joining us, LÃ©once.
LÃ‰ONCE NDIKUMANA, POLITICAL ECONOMY RESEARCH INSTITUTE: Thank you very much for the opportunity to talk to you.
JAY: And I should mention you’re the head of the African Policy Program at PERI institute. So talk about why you use the term the war on offshore finance.
NDIKUMANA: We use the term the war against offshore finance because contrary to the popular perception that Africa has no resources, is indebted to the rest of the world, we actually find that the facts show that Africa generates massive amounts of resources from its natural resources, from public governmentâ€”from government revenue, and it receives a substantial amount of external financing, external debt, ODA. But we also find that a massive amount of funds leaks out of the continent and ends up financing private wealth in the offshore financial centers. And offshore financial centers are places where money is invested in banks, real estate, other physical assets, outside of the sight of the regulatory authorities in originating countries, that is, African countries. So that is money that gets sent to these banks and other centers without being recorded in government official statistics. That money will never pay taxes and will not [benefit] the African countries at all.
And these are centers which thrive on this banking secrecy tradition, where money comes [snip] not reported to the originating countries. And the banks are basically colluding with corrupt leaders and corrupt private investors, who send this money for the purpose of, first of all, avoiding scrutiny on the origin of the money, how the money was acquired, how the money was transferred, and also to evade taxation on the income that’s going to be generated from that money stashed in these official centers. These offshore centers are actuallyâ€”the number of those offshore centers is expanding, the importance is expanding, the volume of money that they handle is expanding. We estimate that from African countries, sub-Saharan African countries, as much as $700Â billion have leaked out of the continent over the past four decades. If you consider that this money has earned interest, the stock of flight capital reaches about $1Â trillion over the past decade.
JAY: And I think you made the point in an earlier interview that if all this money was repatriated, Africa would in fact be a creditorâ€”not creditor state, but a creditor continent rather than debtor.
NDIKUMANA: Yes. In fact, if only a fraction of the stolen money, hidden money in the offshore centers was repatriated to African countries, African countries will get rid of all their debts and they’ll have plenty of money to finance infrastructure, schools, health centers, and you could see growth accelerating in the continent.
JAY: Now, a lot of this, you know, it’s not reallyâ€”the solution’s not going to come from the big banks; it’s going to have to come from Africans and African governments. I mean, isn’t it up to African governments to stop this capital flight? The banks are certainly not going to stop it.
NDIKUMANA: Your question is very interesting. African governments do have the responsibility to clean up their act, to prevent corruption, to make management of government resources, whether it’s natural resources, tax revenue, [more transparent,] so that the general public can know how much money the government is generating domestically, how much money the government is getting from abroad, and where that money is being invested, which projects, and how much benefit these projects are generating, because it’s in the end the resources belonging to the people that should be disclosed to the people as to how they are being used.
But also that’s only part of the story. You also have to look at where the money is going. These banks are actually established in nations with rules, very clear rules about banking. When we say offshore centers, when we say secrecy jurisdictions, when we talk about banking secrecy, people may think that these are alien lands, in no-man lands, but actually you will be surprised to know, if you didn’t knowâ€”I’m sure you know, but for those who didn’t know, they will be surprised to hear that the biggest offshore centers are in countries like the U.K., in London, the U.S., in New York, Paris in France. These are the biggest offshore centers where you find banks colluding with corrupt leaders, corrupt private investors, in hiding and not disclosing their investments and their bank accounts, because some of it was acquired illegally, was transferred illegally, is held illegally in the sense that it’s not reported to the government.
So the reason I make this point is that for Africa to make progress in preventing capital flight, in repatriating its stolen wealth, it will need Western governments to actually enforce the rules of corporate practice and banking practice, so that the rules which are on the books are enforced. Why is it that you and I, when you make a transaction on your bank account in your bank, that transaction is reported to the relevant officials? And I tell you that if, say, you were to earn a bonus on your work and deposit, say, $115,000 on your account tomorrow, that will be reported to relevant banking government office, which is fine. But why isn’t that done for money coming in the U.S., money coming in the U.K., money coming in Paris?
We have seen recently that some African officials have been pursued in the legal system, say, in Paris, for what is called ill-gotten wealth. We should see that being systematic, that every time money comes into a bank, whichever country it is, that money should be closely scrutinized and declared to the originating country.
JAY: Right. I mean, part of this perhaps needs to be historical, in the sense that people, I think, need to understand how much of this was done during the Cold War, a whole infrastructure of corruption and kleptocracies. As long as they were our kleptocracies and opposed to any national liberation movements or opposed to the Soviet Union, rampant corruption was nurtured and encouraged. I mean, how much of that is still sort of continuing today under one rubric or another?
NDIKUMANA: Yes, this is a very important point. If you look at the countries we study in Africa which have high capital flight, this includes countries which were viewed as the strategic allies of the West, such as the Congo. We have a very detailed study, Jim Boyce and I have a very detailed study on the Congo which amassed wealth, whose leadersâ€”Mobutu amassed a massive amount of wealth under the protection of Western governments, because they were seeing him as a strategic ally in the fight against the expansion of communism. And that happened in other countries as well.
This shows you that what is referred to euphemistically as national strategic interests are a big reason for why the West and generally leaders turn a blind eye on evidence of corruption, because they don’t want to frustrate their strategic relationship with the concerned leaders in the developing world. Soâ€”and that’s why I said before that the responsibility is, yes, on the African government, but also there is a lot of responsibility on the development partners in the West to actually also enforce transparency and accountability in international finance.
JAY: So if people want to make a demand in the West on their own governments, it’s about opening the books.
NDIKUMANA: Yes. And you have to understand that when we talk about official development aid, for example, being embezzled by corrupt government leaders and ending up in official centers, this is money which is financed by your, my taxes. So you as a citizen and all those who are listening to us have the right to actually know where aid money goes and how much is being done with the aid money. And if there is evidence that such money is being embezzled, then our governments also have the responsibility to impose transparency on the recipient governments.
JAY: And one of the numbers you give in your paper, something like 40Â to 60Â percent of these dollars that are loaned in aid dollars wind up going offshore into private accounts. Do I have that right?
NDIKUMANA: Yes. Between $0.40 and $0.60 of each dollar whichâ€”it goes into African countries as debt ends up in official centers, because it has been embezzled many times. It doesn’t even leave the bank that lent the money. Other times, it gets embezzled as through the management of the aid and debt-funded project once the project has started in African countries.
JAY: Thanks very much for joining us, LÃ©once.
NDIKUMANA: Thank you so much.
JAY: And thank you for joining us on The Real News Network. And don’t forget: if you want to keep seeing stories like this, we need you to click on the “Donate” button, ’cause if you don’t do that, we can’t do this.
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