21 September 2021

Afghanistan's Year Zero: 1979

From No Good Men Among the Living: America, the Taliban, and the War through Afghan Eyes, by Anand Gopal (Henry Holt, 2014), Kindle pp. 52-53:

As with Mullah Cable and Jan Muhammad, I was interested in Heela’s experience in the new American-backed order. But to start her story with the US invasion would be like “watching a movie from the middle,” as she put it. In truth, Afghanistan’s real Year Zero was 1979, the year of the Soviet invasion, and nothing—not the Taliban, or the American invasion, or the trajectory of Heela’s life—makes much sense without first coming to terms with the Russian occupation and its aftermath.

In the veritable Afghan prehistory of peace and anonymity, the era before the Soviets, there lies a world lost and yet to be recovered. In 1972, the year that Heela was born to a family of journalists and professionals, Kabul was a quaint, relaxed mountain town. An important stop on the “hippie trail”—a well-trodden route for Western stoners and flower children often heading to India—the town had reinvented itself in a few short generations. A wave of progressive reforms had rippled through Afghanistan in the 1950s, resulting in a government decree that veiling was optional for women. In 1964, they were granted the franchise. Photographs from the era show besuited men accompanied by women in short skirts and beehive hairdos; there are movie theaters, broad paved roads, and tree-lined sidewalks.

Out in the heavily tribal Pashtun countryside, however, conservatism still reigned and women lived cloistered in their homes. The state was largely absent, and civil society nonexistent; politics worked through kinship and patronage, leaving clan leaders and landlords to run their own fiefdoms. If you managed to make it out to Kabul and attend university, you came away with a tantalizing taste of what your country could become, and a stark, unremitting sense of the inadequacies of the world you’d left behind. As with so many other developing nations of that era, this disjuncture spawned a crisis of modernity, and the disillusioned urban intelligentsia struggled to articulate a response. Two rival currents emerged: one embracing Communism, which looked to the Soviet Union and third-world liberation movements, and the other, Islamism, which took inspiration from the Muslim Brotherhood and related trends in the Arab world.

For many years these were merely undercurrents, but they rushed to the surface in the late 1970s.

16 September 2021

Negative Human Development in Resource States

From The Looting Machine: Warlords, Oligarchs, Corporations, Smugglers, and the Theft of Africa's Wealth, by Tom Burgis (PublicAffairs, 2016), Kindle pp. 211-212:

In 1970, the year the Olympic movement expelled South Africa, the government passed legislation formally stripping blacks of their citizenship and restricting them to destitute “homelands,” and the authorities appointed a barbaric new commanding officer at Robben Island prison to watch over Mandela and his fellow inmates, South Africa produced some 62 percent of the gold mined worldwide. From the early 1970s to 1993 gold, diamonds, and other minerals accounted for between half and two-thirds of South Africa’s exports annually.

South Africa’s gold and diamonds provided the financial means for apartheid to exist. In that sense white rule was an extreme manifestation of the resource state: the harnessing of a national endowment of mineral wealth to ensure the power and prosperity of the few while the rest are cast into penury and impotence. None of Africa’s resource states today come close to the level of orchestrated subjugation of the majority that the apartheid regime achieved. Neither do they employ apartheid’s racial creed, even if ethnicity has combined poisonously with the struggle to capture resource rent in Nigeria, Angola, Guinea, and elsewhere. But as their rulers, in concert with the multinational corporations of the resource industry, horde the fruits of their nations’ oil and minerals, Africa’s resource states have come to bear a troubling resemblance to the divisions of apartheid.

While the children of eastern Congo, northern Nigeria, Guinea, and Niger waste away, the beneficiaries of the looting machine grow fat. Amartya Sen, the Nobel Prize–winning Indian economist who has examined with great insight why mass starvation occurs, writes, “The sense of distance between the ruler and the ruled—between ‘us’ and ‘them’—is a crucial feature of famines.” That same reasoning could be applied to the provision of other basic needs, including clean water and schooling. And rarely is the distance Sen describes as wide as in Africa’s resource states.

Many of Africa’s resource states experienced very high rates of economic growth during the commodity boom of the past decade. The usual measure of average incomes—GDP per head—has risen. But on closer examination such is the concentration of wealth in the hands of the ruling class that that growth has predominantly benefited those who were already rich and powerful, rendering the increase in GDP per head misleading. A more revealing picture comes from a different calculation. Each year the United Nations ranks all the countries for which it can gather sufficient data (186 in 2012) by their level of human development, things like rates of infant mortality and years of schooling. It also ranks them by GDP per head. If you subtract a country’s rank on the human development index from its rank on the GDP per head index, you get an indication of the extent to which economic growth is actually bettering the lot of the average person in that country. In countries that score zero—as Congo, Rwanda, Russia, and Portugal did in 2012—living standards are roughly where you might expect them to be, given that country’s GDP per head. People in countries with positive scores enjoy disproportionately pleasant living conditions relative to income—Cuba, Georgia, and Samoa top the table with scores of 44, 37, and 28, respectively. A negative score indicates a failure to turn national income into longer lives, better health, and more years of education for the population at large. Of the ten countries that come out worst, five are African resource states: Angola (–35), Gabon (–40), South Africa (–42), Botswana (–55), and Equatorial Guinea.

Equatorial Guinea’s score (–97), comfortably the worst in the world, is all the more remarkable because its GDP per head is close to $30,000 a year, not far below the level of Spain or New Zealand and seventy times that of Congo.

14 September 2021

"Survival of the Fattest" in Rentier States

From The Looting Machine: Warlords, Oligarchs, Corporations, Smugglers, and the Theft of Africa's Wealth, by Tom Burgis (PublicAffairs, 2016), Kindle pp. 188-190:

A governor of one of Nigeria’s thirty-six states is effectively president of his own fiefdom. He has immunity from prosecution and controls the state security budget. The chairman of each of the 774 local governments is answerable to the state governor. To win a presidential primary a candidate needs two-thirds of the states to back him. That backing is in the gift of the governors. The Governors’ Forum is perhaps the most potent gathering in the land. Only about half of Nigeria’s oil revenues are allocated to the federal government. A fifth goes to the local governments. The governors control the quarter of oil revenues that goes to the states.

Oil-producing states receive an additional 13 percent share of Nigeria’s oil income before it is divided between the tiers of government. The state houses of the Niger Delta are powerful pistons of the looting machine. When he agreed to meet me in late 2010, Timipre Sylva had succeeded Goodluck Jonathan as governor of Bayelsa, one of the Delta’s three main states. I had hoped to interview him at Gloryland, the gubernatorial palace set well apart from the shacks that house his constituents. Instead, I was summoned to the penthouse suite of a five-star hotel in Lagos, where Sylva was staying with his entourage during a visit to the commercial capital.

A tall and intelligent man, Sylva was under pressure. Politics in the Niger Delta is unremittingly volatile. Gunmen drift between the militias of MEND, crime gangs, and squads of political thugs that freelance for competing aspirants to power. As Sylva’s rivals sought to force him from office, loyalists were exchanging tit-for-tat attacks with his enemies. Relations with Jonathan, recently elevated to the presidential palace by Yar’Adua’s death, had soured. Little wonder, I suggested, that others coveted his job: his immediate predecessor had found himself president and the one before had siphoned off so much cash that he, like Joshua Dariye and James Ibori, the former governors of Plateau and Delta States, had snapped up enough assets abroad to earn the attention of the British police.

Sylva accepted that there had been widespread corruption among the governors. But he was, he pleaded, just a cog in a patronage system not of his making. “If a chief walks into my office, he expects me to take care of his problems because that is what the military used to do,” Sylva said. “That’s what he’s used to. If I don’t, I’ve got a very big political enemy.”

So you have to “settle” them, I suggested, using the Nigerian term for the dispensing of cash.

“Yes. And you will read that as corruption. But me, I probably will read that as political survival, because I have to survive before I become incorruptible.”

“And you use public funds to do that?” I asked.

“What does he expect me to do? I don’t have that kind of money; the kind of money he’s expecting. Even if I have it privately, I won’t do that with it. And he’s coming to me because I’m governor. If, for example, the big chief comes, and he has to go for a medical check, it shouldn’t be my problem. But it is. If a very big traditional ruler dies somewhere, and they want to do an elaborate burial ceremony, they come to me. I have to do it.”

Me, I probably will read that as political survival. To justify corruption, Sylva reached for the same word—“survival”—that Mahmoud Thiam had chosen when he explained why pariah states are willing to deal with the likes of Sam Pa and the Queensway Group. Said Djinnit, the UN’s man in west Africa, called the competition to control political power in the resource states “a struggle for survival at the highest level.” Paul Collier talks about the law of “the survival of the fattest” in rentier states.

13 September 2021

How Multinationals Dodge Taxes

From The Looting Machine: Warlords, Oligarchs, Corporations, Smugglers, and the Theft of Africa's Wealth, by Tom Burgis (PublicAffairs, 2016), Kindle pp. 165-167:

Two-thirds of trade happens within multinational corporations. To a large extent those companies decide where to pay taxes on which portions of their earnings. That leaves ample scope to avoid paying taxes anywhere or to pay taxes at a rate far below what purely domestic companies pay.

Imagine a multinational company making rubber chickens, called Fowl Play Incorporated. Fowl Play’s headquarters and most of its customers are in the United States. A subsidiary, Fowl Play Cameroon, runs a rubber plantation in Cameroon. The rubber is shipped to a factory in China, owned by another subsidiary, Fowl Play China, where it is made into rubber chickens and packaged. The rubber chickens are shipped to Fowl Play’s parent company in the United States, which sells them to mainly US customers.

Fowl Play could simply pay taxes in each location based on an honest assessment of the proportion of its income that accrues there. But it has a duty to its shareholders to maximize returns, and its executives want the bonuses that come from turning big profits, so its accountants are instructed to minimize the effective tax rate Fowl Play pays by booking more revenues in places with low tax rates and fewer revenues in places with high tax rates. If, for example, Fowl Play wanted to reduce its tax liability in Cameroon and the United States by shifting profits to China, where it has been granted a tax holiday to build its factory, it would undervalue the price at which the rubber is sold from the Cameroonian subsidiary to the Chinese one, then overvalue the price at which the Chinese subsidiary sells the finished rubber chickens to the parent company in the United States. All this happens within one company and bears scant relation to the actual costs involved. The result is that the group’s overall effective tax rate is much lower than it would have been had it apportioned profits fairly. Many such tax maneuvers are perfectly legal. When it is done ethically “transfer pricing,” as the technique in this example is known, uses the same prices when selling goods and services within one company as when selling between companies at market rates. But the ruses to fiddle transfer pricing are legion. A mining company might tweak the value of machinery it ships in from abroad, or an oil company might charge a subsidiary a fortune to use the parent’s corporate logo.

Suppose Fowl Play gets even cannier. It creates another subsidiary, this time in the British Virgin Islands, one of the tax havens where the rate of corporation tax is zero. Fowl Play BVI extends a loan to the Cameroonian subsidiary at an astronomical interest rate. The Cameroonian subsidiary’s profits are canceled out by the interest payments on the loan, which accrue, untaxed, to Fowl Play BVI. And all the while Fowl Play and the rubber chicken industry’s lobbyists can loudly warn Cameroon, China, and the United States that, should they try to raise taxes or clamp down on fiddling, the company could move its business, and the attendant jobs, elsewhere. (The BVI company is only a piece of paper and doesn’t employ anyone, but then there is no need to threaten the British Virgin Islands—its tax rate could not be lower.)

10 September 2021

New African Infrastructure for Whom?

From The Looting Machine: Warlords, Oligarchs, Corporations, Smugglers, and the Theft of Africa's Wealth, by Tom Burgis (PublicAffairs, 2016), Kindle pp. 147-149:

It is too simplistic to see China’s quest for African resources as a Manichean struggle for nature’s treasure between East and West. There is competition, but there is also cooperation in the business of resource extraction. And for all its increased attractiveness to rival investors from overseas, much of Africa remains locked at the foot of the global economy.

Ibrahim Iddi Ango, the industrialist who headed Niger’s chamber of commerce, told me that Niger’s rulers had sold the country short in their negotiations with the Chinese. “They need strategic resources. You must say, ‘You are interested in that? These are the conditions. First, you must use local labor. Second, all the needs you have—for example, the transit—you must use at a minimum 50 percent local operators.’ But when they came the government said none of this. The state took a percentage of the businesses and let the Chinese do what they want.” A brief window of opportunity to use China’s desire for African minerals to insist on securing for Niger the skills and infrastructure that might help to salve the resource curse by broadening the economy was closing. “To diversify, it’s central,” Iddi Ango said—and with good reason. Niger is among the African states most acutely dependent on a handful of raw commodity exports, their economic fortunes yoked to the whims of far-off consumers. On the African Development Bank’s index, where a higher score indicates a more diversified economy, relatively wealthy countries not shackled to the resource trade such as Mauritius and Morocco score 22 and 41, respectively. The average for the whole of Africa, including more prosperous North Africa, is 4.8. The most oil-dependent states, Angola and Chad, record the lowest scores, 1.1. Niger does only marginally better, with a score of 2.4.

“But if you let China do what it wants—as many African countries have—they pay for the oil or the resources and use Chinese labor, Chinese trucks. It’s a big problem,” Iddi Ango said. “They are coming because the resources are here. This moment will not be repeated. We can’t miss it. When the uranium or the oil is finished, they will leave.”

The fall of Tandja demonstrated the limits of China’s readiness to get involved in domestic politics to protect African allies. But Xia Huang, the Chinese ambassador in Niamey, encapsulated how China’s readiness to spend and build allowed Beijing to gain a foothold sufficiently strong that its interests could withstand a coup against an ally. “Today there is a bridge between the two sides of the River Niger,” he told me. “But there is also a bridge that links China and Niger.”

Yet the true value of China’s offer to guide Africa on a path to economic diversification and industrialization—the road that led the rich world to prosperity—rests on whether its construction spree is geared primarily toward cultivating the rulers who govern access to resources or toward broadening the opportunities of the population at large. Neither railways that simply connect Chinese-owned mines to Chinese-built ports for the export of commodities nor vanity projects of great cost but little economic usefulness will lift resource states’ inhabitants from their poverty. Martyn Davies, the chief executive of a South African consultancy called Frontier Advisory who has worked as an adviser on Chinese deals in Africa, told me, “When you have a commodity-driven economy, where a lot of people are excluded, it’s a silo economy. It’s very difficult to build infrastructure that supports inclusive growth. Is Chinese-financed infrastructure going to provide diversification? Which comes first?” He added, “African governments should never assume that responsibility for the development of our continent has been outsourced to Beijing.”

Beijing appears to be undercutting its side of the deal. Chinese goods like the counterfeit textiles flooding into northern Nigeria drown out hopes for industrialization, regardless of how many roads and railways Chinese companies lay. Lamido Sanusi, governor of Nigeria’s central bank from 2009 to 2014, put it well: “So China takes our primary goods and sells us manufactured ones. This was also the essence of colonialism. The British went to Africa and India to secure raw materials and markets. Africa is now willingly opening itself up to a new form of imperialism.”

09 September 2021

Nigeria's Smuggled Economy

From The Looting Machine: Warlords, Oligarchs, Corporations, Smugglers, and the Theft of Africa's Wealth, by Tom Burgis (PublicAffairs, 2016), Kindle pp. 61-62, 65:

Weapons and unwilling human traffic cross Nigeria’s northern border covertly. But the flow of counterfeit Chinese-made textiles has grown so voluminous that it would be impossible to keep it secret even if secrecy were required to ensure its safe passage. All the same, most of the shipments go through under cover of darkness. Those who control the trade engage in highly organized “settling,” or bribing, of the border officials, smoothing the textiles’ transit.

The Nigerian stretch is just the final leg of a 6,200-mile journey. It begins in Chinese factories, churning out imitations of the textiles that Nigerians previously produced for themselves, with their signature prime colors and waxiness to the touch. By the boatload they arrive in west Africa’s ports, chiefly Cotonou, Benin's biggest city, a tiny country beside Nigeria that has, like Montenegro in Europe or Paraguay in South America, become a state whose major economic activity is the trans-shipment of contraband. At the ports the counterfeit consignments are loaded onto trucks and either driven straight over the land border between Benin and western Nigeria or up through Niger and round to the border post with its taciturn chief. The trade is estimated to be worth about $2 billion a year, equivalent to about a fifth of all annual recorded imports of textiles, clothing, fabric, and yarn into the whole of sub-Saharan Africa.

Smuggling is a long-established profession here. Before colonial cartographers imposed the frontier, today’s smuggling routes were the byways of legitimate commerce. The border marks a delineation of what used to be British and French territory in west Africa, but no natural division of language or ethnicity exists. People on both sides speak Hausa, a tongue in which the word for smuggling, sumoga, strikes a less pejorative note than its English equivalent. The textile smuggling bosses are the oligarchs of the northern borderlands. For those in their pay, they can be generous benefactors.

...

The cheaper price of smuggled garments relative to locally produced ones was good news, superficially at least, for the traders’ hard-pressed customers but less so for the employees of Nigeria’s textile industry. “It is a pitiable situation,” said Hillary, apparently oblivious to his and his colleagues’ role in their compatriots’ downfall. “All the [textile factories] we have here have shut down. The workers are now on the streets.”

In the mid-1980s Nigeria had 175 textile mills. Over the quarter-century that followed, all but 25 shut down. Many of those that have struggled on do so only at a fraction of their capacity. Of the 350,000 people the industry employed in its heyday, making it comfortably Nigeria’s most important manufacturing sector, all but 25,000 have lost their jobs. Imports comprise 85 percent of the market, despite the fact that importing textiles is illegal. The World Bank has estimated that textiles smuggled into Nigeria through Benin are worth $2.2 billion a year, compared with local Nigerian production that has shriveled to $40 million annually. A team of experts working for the United Nations concluded in 2009, “The Nigerian textile industry is on the verge of a total collapse.” Given the power crisis, the near-impassable state of Nigeria’s roads, and the deluge of counterfeit clothes, it is a wonder that the industry kept going as long as it did.

08 September 2021

Congo's Tantalum Wealth

From The Looting Machine: Warlords, Oligarchs, Corporations, Smugglers, and the Theft of Africa's Wealth, by Tom Burgis (PublicAffairs, 2016), Kindle p. 30:

The Congolese are consistently rated as the planet’s poorest people, significantly worse off than other destitute Africans. In the decade from 2000, the Congolese were the only nationality whose gross domestic product per capita, a rough measure of average incomes, was less than a dollar a day.

Tantalum’s extremely high melting point and conductivity mean that electronic components made from it can be much smaller than those made from other metals. It is because tantalum capacitors can be small that the designers of electronic gadgets have been able to make them ever more compact and, over the past couple of decades, ubiquitous.

Congo is not the only repository of tantalum-bearing ores. Campaigners and reporters perennially declare that eastern Congo holds 80 percent of known stocks, but the figure is without foundation. Based on what sketchy data there are, Michael Nest, the author of a study of coltan, calculates that Congo and surrounding countries have about 10 percent of known reserves of tantalum-bearing ores. The real figures might be much higher, given that reserves elsewhere have been much more comprehensively assessed. Nonetheless, Congo still ranks as the second-most important producer of tantalum ores, after Australia, accounting for what Nest estimates to be 20 percent of annual supplies. Depending on the vagaries of supply chains, if you have a PlayStation or a pacemaker, an iPod, a laptop, or a mobile phone, there is roughly a one-in-five chance that a tiny piece of eastern Congo is pulsing within it.

The insatiable demand for consumer electronics has exacted a terrible price. The coltan trade has helped fund local militias and foreign armies that have terrorized eastern Congo for two decades, turning what should be a paradise into a crucible of war.