The Looting Machine: Warlords, Oligarchs, Corporations, Smugglers, and the Theft of Africa's Wealth
For my 2018 "Year of Crime and Punishment," I've been reading about bank heists, insider trading, contract killing, and identity theft. But all of these pale in comparison to the scale of the financial crimes described in "The Looting Machine". Financial Times reporter Tom Burgis traces the illicit flows of tens of billions of dollars of African natural resource wealth to local dictators, Western corporations and financial elites, and - more recently - massive Chinese enterprises. Noting that "like its victims, its beneficiaries have names," Burgis dives into the specifics in African resource states from Angola to Zimbabwe. He names names and backs up his claims with painstaking on-the-ground investigative reporting. I was shocked by his level of access to the highest levels of African government and industry.
Yet there was only so much of the hidden financial web that Burgis could untangle. He runs into major roadblocks when investigating Chinese companies generally and the shadowy "Queensway Group" in particular. When Burgis isn't able to get the exact details, he still illuminates the general mechanisms by which the resource wealth of African states is funneled into the hidden bank accounts of the political elites. I especially appreciated a concept from an Angola specialist Burgis met:
“cryptocracy” — a system of government in which the levers of power are hidden.
Indeed, parts of the book strongly echoed the main thesis of "Treasure Islands", another book in my "year of crime" about how banking privacy and offshore tax evasion weaken governance and corrod accountability. Both single out the notorious "Elf Affair" between Omar Bongo in Gabon and Elf, the French oil company. Because the chronically cash-strapped rulers of resource-rich African states can rely on resource royalties from Western and Chinese companies, they're able to fund their regimes without taxing their local populations. This makes rulers unaccountable to their citizens - they don't need their consent to keep the army paid and the government running. They're able to get away with all sorts of blatantly self-serving corruption, like appropriating billions in government revenue and stashing it in personal bank accounts in London. Some of the governing tactics reminded me of the cartel management strategies in Tom Wainwright's fantastic "Narconomics".
Of course, the Western world has been complicit in propping up African dictators for centuries. Oil companies are notorious for this, and Burgis details some of Shell's sketchy operations in the oil-rich Nigerian delta. He also describes how the World Bank and the IMF fund Western companies exploiting African natural resources. But as the World Bank has gotten more squeamish about supporting some of the more repressive regimes in Africa, China has stepped right in. Burgis does an excellent job of tracking the explosion of Chinese investment in Africa and how it continues to support many of the same old toxic governing practices. I had sort of expected the world's two biggest economic powers to be deep into Africa, but Burgis surprised me by also highlighting the role that a handful of Israeli diamond and mining companies play in financing African regimes (and providing military training).
Yet Burgis doesn't lay 100% of the blame on China and the West. He includes a brutal quote from novelist Chinua Achebe:
"The Nigerian problem is the unwillingness or inability of its leaders to rise to the responsibility, to the challenge of personal example which are the hallmarks of true leadership."
Burgis goes even further, pushing into territory that must have made his publisher very nervous. He broaches the delicate subject of multiculturalism, noting that ethnic diversity can weaken the civic spirit of a country and leave it vulnerable to exploitation by outsiders:
In resource states ethnicity takes a terrible form. As resource rents beget a ruling class that is not accountable to the people, power is maintained through patronage. Public service is largely abandoned. With no record of service to point to, politics becomes a game of mobilizing one’s ethnic brethren. For us to win, they have to lose. The social contract is replaced with a compact of violence.
But while this book contains no shortage of outrageous corruption and desperate poverty, Tom Burgis distinguishes himself by actually providing a reasonable idea for how to begin solving this vital problem:
But what if companies were subject to a duty of care to prevent corruption? Imagine a criminal offense that made a company liable if it proceeded with a transaction without having identified the ultimate beneficiaries of its target or prospective partner and if that transaction were subsequently shown to have enriched officials. The company would be treated before the law as though it had knowingly concocted a corrupt scheme. At a stroke, one of the chief conduits for corruption would be stoppered.
Burgis opened my eyes to a whole set of dynamics that I was completely unaware of. This book was a fantastic addition to my 2018 "year of crime" and I'm excited to read more about government corruption.
My highlights below
INTRODUCTION - A Curse of Riches
A solid-looking guard keeps watch at the entrance, above which flutter three flags. One is Angola’s. The second is that of China, the rising power that has lavished roads, bridges, and railways on Angola, which has in turn come to supply one in every seven barrels of the oil China imports to fire its breakneck economic growth. The yellow star of Communism adorns both flags, but these days the socialist credentials of each nation’s rulers sit uneasily with their fabulous wealth. The third flag does not belong to a nation but instead to the company that built the tower. On a white background, it carries three gray letters: CIF, which stands for China International Fund, one of the more visible arms of the Queensway Group’s mysterious multinational network. Combined, the three flags are ensigns of a new kind of empire.
Analysts at the consultancy McKinsey have calculated that 69 percent of people in extreme poverty live in countries where oil, gas, and minerals play a dominant role in the economy and that average incomes in those countries are overwhelmingly below the global average.
The revenue that governments receive from their nations’ resources is unearned: states simply license foreign companies to pump crude or dig up ores. This kind of income is called “economic rent” and does not make for good management. It creates a pot of money at the disposal of those who control the state. At extreme levels the contract between rulers and the ruled breaks down because the ruling class does not need to tax the people to fund the government — so it has no need of their consent.
An economy based on a central pot of resource revenue is a recipe for “big man” politics. The world’s four longest-serving rulers — Teodoro Obiang Nguema of Equatorial Guinea, José Eduardo dos Santos of Angola, Robert Mugabe of Zimbabwe, and Paul Biya of Cameroon — each preside over an African state rich in oil or minerals. Between them they have ruled for 136 years.
Africa accounts for 13 percent of the world’s population and just 2 percent of its cumulative gross domestic product, but it is the repository of 15 percent of the planet’s crude oil reserves, 40 percent of its gold, and 80 percent of its platinum
In 2010 fuel and mineral exports from Africa were worth $333 billion, more than seven times the value of the aid that went in the opposite direction (and that is before you factor in the vast sums spirited out of the continent through corruption and tax fiddles).
The International Monetary Fund defines a “resource-rich” country — a country that is at risk of succumbing to the resource curse — as one that depends on natural resources for more than a quarter of its exports. At least twenty African countries fall into this category.
The resource curse is not merely some unfortunate economic phenomenon, the product of an intangible force; rather, what is happening in Africa’s resource states is systematic looting. Like its victims, its beneficiaries have names.
That looting machine has been modernized. Where once treaties signed at gunpoint dispossessed Africa’s inhabitants of their land, gold, and diamonds, today phalanxes of lawyers representing oil and mineral companies with annual revenues in the hundreds of billions of dollars impose miserly terms on African governments and employ tax dodges to bleed profit from destitute nations. In the place of the old empires are hidden networks of multinationals, middlemen, and African potentates. These networks fuse state and corporate power. They are aligned to no nation and belong instead to the transnational elites that have flourished in the era of globalization. Above all, they serve their own enrichment.
1 - Futungo, Inc.
Today Angola boasts sub-Saharan Africa’s third-biggest economy, after Nigeria and South Africa.
“When the MPLA dropped its Marxist garb at the beginning of the 1990s,” writes Ricardo Soares de Oliveira, an authority on Angola, “the ruling elite enthusiastically converted to crony capitalism.” The court of the president — a few hundred families known as the Futungo, after Futungo de Belas, the old presidential palace — embarked on “the privatization of power.”
While other MPLA cadres studied in Baku or Moscow and returned to Angola to fight the bush war against Unita, Vicente honed his English and his knowledge of the oil industry at Imperial College in London. Back home he began his rise through the oil hierarchy. In 1999, as the war entered its endgame, dos Santos appointed him to run Sonangol, the Angolan state oil company that serves, in the words of Paula Cristina Roque, an Angola expert, as the “chief economic motor” of a “shadow government controlled and manipulated by the presidency.”
In 2011 Sonangol’s $34 billion in revenues rivaled those of Amazon and Coca-Cola.
When the International Monetary Fund examined Angola’s national accounts in 2011, it found that between 2007 and 2010 $32 billion had gone missing, a sum greater than the gross domestic product of each of forty-three African countries and equivalent to one in every four dollars that the Angolan economy generates annually. Most of the missing money could be traced to off-the-books spending by Sonangol; $4.2 billion was completely unaccounted for.
Goldman and two of the wealthiest US private equity funds, Carlyle and Riverstone, together put up $500 million to launch Cobalt.
A long-neglected 1977 statute prohibits American companies from participating in the privatization of power in far-off lands. Updated in 1998, the Foreign Corrupt Practices Act (FCPA) makes it a crime for a company that has operations in the United States to pay or offer money or anything of value to foreign officials to win business.
Oil and mining companies have been the subject of more cases under the FCPA and similar laws passed elsewhere than any other sector.
Delivering a suitcase stuffed with cash is only the simplest way to enrich local officials via oil and mining ventures run by foreign companies. A more sophisticated technique involves local companies, often with scant background in the resource industries. These companies are awarded a stake at the beginning of an oil and or mining project alongside the foreign corporations that will do the digging and the drilling. Sometimes genuine local businessmen own such companies. Sometimes, though, they are merely front companies whose owners are the very officials who influence or control the granting of rights to oil and mining prospects and who are seeking to turn that influence into a share of the profits.
A reason why foreign resources companies conduct what is known as “due diligence” before embarking on investments abroad is to seek to establish who really owns their local partners. In some cases due diligence investigations amount, in the words of a former top banker, to “manufacturing deniability.”
Angola’s government has ploughed petrodollars into contracts for roads, housing, railways, and bridges at a rate of $15 billion a year in the decade to 2012, a huge sum for a country of 20 million people. Roads are getting better, railways are slowly snaking into the interior, but the construction blitz has also proved a bonanza for embezzlers: kickbacks are estimated to account for more than a quarter of the final costs of government construction contracts. And much of the funding is in the form of oil-backed credit from China, much of which is marshaled by a special office that General Kopelipa has run for years.
The Chinese and Angolan flags fluttered above Kilamba’s entrance. This was a flagship project for China’s undertaking in Africa: Xi Jinping toured the site while it was under construction in 2010, three years before he ascended from the Chinese vice presidency to the presidency.
Kilamba was, in the words of the Angolan campaigner Rafael Marques de Morais, “a veritable model for African corruption.”
Mindful that in 2001 BP had been threatened with ejection after it announced plans to publish some details of its Angolan contracts, the oil companies kept the terms of the bonuses safely shrouded.
Both the Futungo’s business ventures and the state institutions’ activities are kept within a fortress of secrecy, so much so that Edward George, an Angola specialist who has studied dos Santos’s rule for many years, calls the regime a “cryptocracy” — a system of government in which the levers of power are hidden.
Since 2004 China Sonangol has amassed stakes in a dozen Angolan oil ventures, including some of the most prolific, as well as a slice of the country’s richest diamond mine. Sonangol, the state oil company that is the Futungo’s financial engine, owns 30 percent of China Sonangol. The remainder belongs to the band of Hong Kong–based investors that is known as the Queensway Group and is fronted by a bearded, bespectacled Chinese man called Sam Pa.
2 - “It Is Forbidden to Piss in the Park”
Coltan contains a metal whose name tantalum is derived from that of the Greek mythological figure Tantalus. Although the Greek gods favored him, he was “not able to digest his great prosperity, and for his greed he gained overpowering ruin.”
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.
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.
The boom in mobile phones as well as in the rest of consumer electronics and games consoles caused voracious demand for tantalum. The two biggest companies that processed tantalum, Cabot of the United States and H.C. Starck of Germany, foresaw prolonged high demand. They signed long-term contracts, locking in their supply of tantalum ores. That created a shortage on the open market and sparked a scramble to find new supply sources. In the course of 2000, prices for tantalum ores rose tenfold. Congo was ripe for the picking.
Congo’s rulers have built a shadow state on the foundations of Katanga’s minerals, resembling the one that Angola’s Futungo has fashioned from crude oil.
“When they came I saw a young man who looked very bright,” Mawapanga Mwana Nanga, then the rebels’ finance chief, told me years later. An agronomist who had trained in Kentucky, Mawapanga was on the lookout for talented recruits as he prepared to inherit a ransacked treasury.
Oscar Mudiay, a senior civil servant in Kabila’s government, told me that the president received a minimum of $4 million each week delivered in suitcases by state-owned and private mining companies.
Four weeks later one of Laurent Kabila’s bodyguards, an easterner who had been among the cohort of child soldiers in Kabila’s rebel army, approached the president and shot him three times at close range, for reasons that have been the subject of competing conspiracy theories ever since.
In four years Katumba had gone from a junior post in a Johannesburg bank to the side of Congo’s new president. He was appointed minister of the presidency and state portfolio, in charge of state-owned companies. In 2002 UN investigators appointed to study the illegal exploitation of Congo’s resources named him as one of the key figures in an “elite network” of Congolese and Zimbabwean officials, foreign businessmen, and organized criminals who were orchestrating the plunder of Congolese minerals under cover of war. “This network has transferred ownership of at least $5 billion of assets from the state mining sector to private companies under its control in the past three years with no compensation or benefit for the state treasury of the Democratic Republic of the Congo,” the UN team wrote.
Africa Confidential, the most comprehensive publication in English on the continent’s affairs,
Eastern Congo’s militias — not to mention the army itself — have many ways to bring in revenue, from taxing commercial traffic to ranching and trading in charcoal. But the mining trade is particularly lucrative and has the advantage of bringing in foreign currency that can buy arms.
The conflict goes on because it has its own financing: the mines and the weapons. It has its own economy.”
Mwangachuchu told the UN team he paid 20 cents per kilo of coltan exported from his mines at checkpoints he suspected were run by the CNDP. That levy alone would have channeled thousands of dollars a year into the militia’s war chest. Altogether eastern Congo’s militias are estimated to have raked in something to the tune of $185 million in revenues from the trade in coltan and other minerals in 2008.
One night in a Goma bar a senior army officer fumed with anger when I asked him about Mwangachuchu and other mining barons of North Kivu. He damned them all as war profiteers who preferred to pay a few dollars to rebel-run rackets than have a functioning state tax them properly.
As we drove away it occurred to me that we had witnessed the Congolese state in microcosm. The soldier was following the example set by Kabila, Katumba, Mwangachuchu, and Nkunda: capture a piece of territory, be it a remote intersection of potholed road, a vast copper concession, or the presidency itself; protect your claim with a gun, a threat, a semblance of law, or a shibboleth; and extract rent from it. The political economy of the roadblock has taken hold. The more the state crumbles, the greater the need for each individual to make ends meet however they can; the greater the looting, the more the authority of the state withers.
One other guest at the funeral stood out. He was the lone white face in the front row. Kabila clasped his hand. The burly, bearded man in a yarmulke, the Jewish skullcap, was Dan Gertler. He was the all-important intersection between the shadow state that controlled access to Congo’s minerals and the multinational mining companies that coveted them. The grandson of one of the founders of Israel’s diamond exchange, in his early twenties Gertler set forth to seek his own fortune. He went to Angola, then still deep in civil war and a rich source of diamonds.
When Joseph took his new friend to meet his father, the president told the young Israeli that if he could raise $20 million without delay, he could have a monopoly to buy every diamond mined in Congo. Gertler cobbled together the cash and was granted the monopoly.
UN investigators declared that Gertler’s diamond monopoly had been a “nightmare” for Congo’s government and a “disaster” for the local diamond trade, encouraging smuggling and costing the treasury tax revenue. It could not last. After Joseph Kabila succeeded his assassinated father in 2001, the monopoly was canceled under pressure from foreign donors.
“Kabila can only keep himself in power with the help of people like Gertler: it’s like an insurance mechanism — someone who can get you money and stuff when you need it.”
Gertler’s particular contribution was to build a tangled corporate web through which companies linked to him have made sensational profits through sell-offs of some of Congo’s most valuable mining assets. “The line between the interests of the state and the personal interests of the president is not clear,” Kamitatu told me. “That is the presence of Gertler.”
Dan Gertler’s Congolese mining deals have made him a billionaire. Many of the transactions in which he has played a part are fiendishly complicated, involving multiple interlinked sales conducted through offshore vehicles registered in tax havens where all but the most basic company information is secret. Nonetheless, a pattern emerges. A copper or cobalt mine owned by the Congolese state or rights to a virgin deposit are sold, sometimes in complete secrecy, to a company controlled by or linked to Gertler’s offshore network for a price far below what it is worth. Then all or part of that asset is sold at a profit to a big foreign mining company, among them some of the biggest groups on the London Stock Exchange.
At this stage all Gertler had was a deal to sell to ENRC a stake in SMKK that he did not yet own. That was soon rectified. On February 1, 2010, Gertler’s Emerald Star signed an agreement with Gécamines to buy the Congolese state’s 50 percent share in SMKK for $15 million. ENRC duly exercised its option to buy the stake by buying Emerald Star for another $50 million on top of the $25 million it had paid for the option. The interwoven deals were done and dusted by June 2010. All the corporate chicanery masked a simple fact: the Congolese state had sold rights to a juicy copper prospect for $15 million to a private company, which immediately sold the same rights on for $75 million—a $60 million loss for the state and a $60 million profit for Gertler.
The best estimate, calculated by Kofi Annan’s Africa Progress Panel, puts the losses to the Congolese state from SMKK and four other such deals at $1.36 billion between 2010 and 2012. Based on that estimate, Congo lost more money from these deals alone than it received in humanitarian aid over the same period.
Between 2007 and 2012 just 2.5 percent of the $41 billion that the mining industry generated in Congo flowed into the country’s meager budget.
In 1908 Leopold yielded personal ownership of Congo to the Belgian state, which, keen to retain influence over the mineral seams of Katanga following independence in 1960, encouraged the region’s secessionists, helping to bring down the liberation leader Patrice Lumumba in a CIA-sponsored coup that ushered in Mobutu, who became one of the century’s most rapacious kleptocrats.
A senior Congolese army officer remembered Viktor Bout, a notorious KGB agent–turned–arms dealer who was implicated in the illicit coltan trade — and whose exploits inspired the 2005 film Lord of War — dropping in to do business.
imitating the Kimberley Process, which was designed to stem the flow of “blood diamonds.”
Clean miners have been squeezed, as the retreat of Western buyers has let Chinese comptoirs gain a near-monopoly on Congolese coltan, allowing them to dictate prices.
Gertler maintains that, far from being a predator, he is among Congo’s greatest benefactors. He and his representatives point out, with some justification, that unlike the most egregious asset-flippers, who do nothing beyond using bribes and connections to win mining rights before selling them on, Gertler’s operations in Congo actually produce minerals, and lots of them. His company, the Fleurette Group, says it has invested $1.5 billion “in the acquisition and development of mining and other assets in the DRC,” that it supports twenty thousand Congolese jobs, and that it ranks among the country’s biggest taxpayers and philanthropists. Gertler himself has said his work in Congo is worthy of a Nobel Prize.
3 - Incubators of Poverty
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.
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.
Two-thirds of the newfound oil reserves lay within the territory that secessionists claimed for themselves when they declared the Republic of Biafra in 1967, raising the stakes in the standoff between the ethnic blocs vying for power in the young nation. Between five hundred thousand and 2 million Nigerians died in the civil war that ensued, many from starvation.
Nigeria’s stocks of natural gas, estimated to be the eighth largest on the planet, have scarcely been tapped, but they already account for one in every twenty cubic feet that the European Union imports.
Nigeria may be the largest source of African energy exports, but it generates only enough electricity to power one toaster for every forty-four of its own people.
A privatization drive in recent years has raised some tentative hope of improvement, but for now Nigeria produces only half as much electricity as North Korea.
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.
Alhaji Dahiru Mangal is a businessman whose fortune is thought to run to billions, a confidante of presidents, a devout Muslim, and a philanthropist whose airline transports Nigerian pilgrims to the annual hajj in Mecca. He also ranks among west Africa’s preeminent smugglers.
There are, he said, sixteen factories in China dedicated to churning out textiles with a “Made in Nigeria” badge sewn into them.
Dutch Disease is a pandemic whose symptoms, in many cases, include poverty and oppression. The disease enters a country through its currency. The dollars that pay for exported hydrocarbons, minerals, ores, and gems push up the value of the local currency. Imports become cheaper relative to locally made products, undercutting homegrown enterprises. Arable land lies fallow as local farmers find that imported fare has displaced their produce.
A cycle of economic addiction sets in: the decay of the other parts of the economy increases the dependency on natural resources. Opportunity becomes confined to the resources business, but only for the few: whereas mines and oil fields require vast sums of capital, they employ tiny workforces compared with farming or manufacturing.
Demanding their rights from their British colonial rulers, the American revolutionaries declared that there would be no taxation without representation. The inverse is also true: without taxation, there is no representation. Not being funded by the people, the rulers of resource states are not beholden to them.
Maintaining power through patronage is expensive. But self-enrichment is part of the prize. And all that stolen money has to go somewhere. Some of it is used to pay off patronage networks. Some of it buys elections. Much of it goes overseas: according to a US Senate report, kleptocrats from African resource states have used banks, including HSBC, Citibank, and Riggs, to squirrel away millions of plundered dollars in the United States alone, often concealing the origin of their wealth by shifting funds through secretive offshore tax havens.
Because money launderers are seeking primarily to turn dirty cash into other assets as quickly as possible rather than to turn a profit or invest prudently, they are happy to pay more than a fair price for goods and services. That distorts everything, from banking to real estate. It furthers the accumulation of a country’s prime economic assets in the hands of the minority, just as Sonangol, the Angolan state-owned oil company that is the engine of the Futungo’s looting machine, has expanded into property, finance, and aviation.
Shell has admitted paying bungs worth $2 million between 2004 and 2006 to Nigerian customs officials to smooth the importation of materials for Bonga, its giant offshore oilfield, part of a wider scheme in which the Swiss group Panalpina showered bribes on Nigerian officials, some on behalf of Shell, booking them as “evacuations,” “special handling,” and “prereleases.”
By funding Umaru Yar’Adua’s election campaigns, Mangal had ensured he had a protector at the top of the rentier class that uses Nigeria’s oil to maintain its hegemony.
For James Ibori, the game was up. He fled to Dubai, where he was detained and extradited to face trial in London, a rare example of the British authorities going after the foreign loot stashed in the UK capital’s property market. Ibori pleaded guilty to money laundering and fraud and, in April 2012, was sentenced to thirteen years in prison.
These networks vary by country, creed, and commodity, but they have some traits in common. They fuse private interests with public office; they operate in the underbelly of globalization, where criminal enterprises and international trade overlap; and they depend on the power of the oil and mining industries to create narrow economies in which access to wealth is concentrated in the hands of small, repressive ruling classes and those who bribe their way to favor.
4 - Guanxi
When applied to politics and business guanxi can become indistinguishable from corruption or nepotism. Some of the recent slew of corruption scandals involving foreign multinationals in China, such as the slush fund allegedly run by GlaxoSmithKline to bribe doctors and officials and J.P. Morgan Chase’s alleged practice of giving jobs to relatives of the Chinese elite (currently under investigation by the American, British, and Hong Kong authorities), might be regarded as the overzealous pursuit of guanxi.
Even the most dedicated analysts of China’s intelligence agencies acknowledge that outsiders understand their workings far less than they understand, say, the CIA or MI6. Since 1983, when the intelligence arm of the Communist Party of China was absorbed into the newly formed Ministry of State Security, the MSS has been China’s main civilian intelligence agency, the nearest equivalent to the CIA, focused above all on ferreting out foreign links to domestic threats to Communist rule.
When Deng Xiaoping ousted the Maoists and began reforming China’s economy in 1978, he encouraged the military to bring in its own revenues through business, freeing up the national budget to fund development projects. By the end of the following decade the PLA’s network of twenty thousand companies had interests ranging from pharmaceuticals to manufacturing weapons and smuggling commodities.
“Sam’s contacts [in Africa] were made during the freedom movements, and now they are diversified into business,” Ariel went on. “It’s a closed club. The world of weapons is a tiny world — everybody knows everybody. You make money for the club, and you make money for yourself. Once you get very high you are allowed to have your own private businesses. Oil, diamonds, and weapons go together.” As globalization replaced ideology as the dominant force in geopolitics, the mission of foreign spooks in Africa evolved. “Today intelligence is not for starting wars,” Ariel said. “Today intelligence is for natural resources.”
The first summit of the Forum on China-Africa Co-operation, held in Beijing in October 2000 to mark the formal start of the Sino-African courtship, was attended by ministers from forty-four African states and addressed by Jiang Zemin, the architect of China’s “go out” policy.
In 2002 Chinese trade with Africa was worth $13 billion a year, half as much as African trade with the United States. A decade later it was worth $180 billion, three times the value of Africa-US trade — although still needing to double again to eclipse African trade with Europe. Two-thirds of China’s imports from Africa were oil; the rest was other raw materials, mainly minerals.
China was reshaping Africa’s economy through trade, but it was also investing directly. The biggest deals, replicated across the continent’s resource states, involved a cheap loan, typically in the single-digit billions of dollars, to fund infrastructure built by Chinese companies and to be repaid in oil or minerals. China’s grand bargains came to be known, after their prototype, as “Angola Mode.”
Shortly after it was founded New Bright moved its registered address a couple of blocks across the Admiralty business district to Two Pacific Place, a skyscraper in a redevelopment of what had once been a barracks into smart offices and up-market shops at 88 Queensway. The first seed of the syndicate that would come to be known as the Queensway Group had been sown. New Bright had two shareholders. One, with 30 percent of the stock, was Lo Fong-hung. The remaining 70 percent was allotted to another woman, who lacked the credentials of her partner. Whereas Lo exuded regal authority stemming from her apparent connections to the military and Party elites and Wang boasted a glittering CV, Veronica Fung had only one discernible connection of note — to Sam Pa.
But Vicente and Sonangol opted not to deal directly with China’s government and its state-owned oil company, Sinopec. Instead, it went into business with an obscure private company registered in Hong Kong, with no assets other than its founders’ guanxi.
In 2010 the Queensway Group’s stake in Block 18 was valued at just shy of a billion dollars. Its share of the crude was worth about $3.5 million every day.
Isaías Samakuva, the leader of the Angolan opposition political party into which Unita has evolved since its defeat in the civil war, told me that China Sonangol was “the key to all the support that is given to Mr. dos Santos, to his rule” but that understanding how the Futungo drew wealth and power from the company was impossible because “everything is in the dark.”
Manuel Vicente had informed China’s state-owned oil companies that if they wanted to do business in Angola, they would have to go through these joint ventures with Queensway Group companies.
Sam Pa had become the gatekeeper to Angolan crude, and China was powerless to circumvent him.
5 - When Elephants Fight, the Grass Gets Trampled
According to his enemies, Thiam also had less honorable motives. In a 2014 lawsuit Rio Tinto accused him of receiving a $200 million bribe — subsequently revised to $100 million — from Beny Steinmetz to ensure that he protected BSGR’s newly won claim to Simandou’s northern half.
An Associated Press reporter who visited the area saw a dozen white men in black uniforms with “instructor” written on the back. The ones speaking Afrikaans were presumably members of the rough-and-ready corps of white South African former soldiers who signed up as mercenaries after apartheid and who are now to be found scattered across Africa, guarding mines in Congo or attempting coups in Equatorial Guinea. Others were conversing in Hebrew. Israel has long exported the prowess of its armed forces. Security firms and mercenaries with ties to the Israeli Defence Forces conduct freelance assignments abroad.
In the coming days, Thiam told me, the Queensway Group, through China International Fund, would announce joint ventures with the Guinean state that would undertake projects in mining, energy, and infrastructure. The whole package would be worth $7 billion, equivalent to one and a half times the size of Guinea’s economy. China International Fund was to be paid for the infrastructure projects with revenues from mining concessions the government would grant it.
But the deal’s most notable effect was to throw a lifeline to Dadis’s junta, which faced financial asphyxiation through the sanctions that followed the massacre.
Thiam confirmed to me later that the Queensway Group had indeed moved $100 million into Guinea in the junta’s hour of need: $50 million to be used for the first projects envisioned under its $7 billion deal and another $50 million to be deposited at the central bank to prop up Guinea’s quickly dwindling reserves of foreign currency. I got hold of the confidential documents setting out the deal, which revealed that the Queensway Group had agreed to transfer cash to the junta by immediately buying some of Guinea’s shares in the Singapore-based joint venture they had formed.
In the final months of the junta’s rule BSGR had struck a sensational deal. Even by the standards of Beny Steinmetz, it was the deal of a lifetime. BSGR reached an agreement to sell to Vale, the Brazilian group that mines more iron ore than any other company, a 51 percent share in BSGR’s Guinean assets, which included the northern half of the bounteous deposit at Simandou—for $2.5 billion. BSGR had paid nothing for its mining rights (companies typically promise to invest to bring the seams into production and pay taxes on royalties on them rather than paying fees at the outset) and had spent, according to the company’s public statements, $160 million on preliminary work on its prospects. Vale paid $500 million up front for its stake, immediately securing for BSGR close to a threefold return on its investment. The balance was due to follow as targets were met. One long-serving expatriate in the Guinean mining game shook his head in envy over a beer in downtown Conakry and declared that Steinmetz had won “the jackpot.”
BSGR maintained that it was the victim of a conspiracy orchestrated by, among others, George Soros, who in addition to being an adviser to Condé, was also a major donor to Revenue Watch, a transparency organization that was assisting Guinea with its mining reforms; Soros also gave money to the anticorruption group Global Witness, which published reports on the bribery allegations. The result, BSGR’s representatives claimed, was “a coordinated but crude smear campaign.”
A judge granted him permission to conduct forensic tests on the contracts that his lawyers, like BSGR, claimed were fakes, but then, in March 2014, three weeks before he was due to go on trial, Cilins pleaded guilty to obstruction of justice. In July he was sentenced to two years in prison, including time served. He was fined $75,000, and he forfeited the $20,000 he was carrying when he was arrested. The investigation into BSGR’s Guinean dealings spread across three continents. The company is registered in Guernsey, but its directors and executives operate out of offices in Mayfair and Geneva, where Steinmetz lives.
6 - A Bridge to Beijing
For decades France had enjoyed a de facto monopoly on the stuff that makes Niger a place of strategic importance — its uranium. France consumes more uranium than any country apart from the United States. Nuclear power stations supply three-quarters of France’s electricity.
To break with France so brazenly, Tandja needed an alternative ally among the world powers. He found one in the country with the fastest-growing nuclear industry: China.
A third of all Chinese overseas contracts are in Africa. In recent years Chinese funding has accounted for two-thirds of Africa’s spending on infrastructure.
The tallest building in the capital, Addis Ababa, completed in 2012 at the cost of $200 million, is the new headquarters of the African Union, a magnificent curved edifice that stands as the emblem of China’s African ambition. Beijing picked up the bill for the AU headquarters. (NOTE: there are now allegations that the Chinese bugged the AU headquarters! https://qz.com/1192493/china-spied-on-african-union-headquarters-for-five-years/)
The $3.5 trillion in foreign currency reserves that China has amassed as the world’s largest exporter could not simply be parked in US government bonds, the investment equivalent of sticking your cash under the mattress. “We need to use part of them in overseas investments,” Zhao said. “Africa for the next twenty years will be the single most important business destination for many Chinese mega-corporations.”
It was Charles de Gaulle who devised the French system of influence over its former African colonies. De Gaulle had led the exiled French government during World War II and became the towering statesman of postwar French politics, assuming the presidency in 1958 as France was in tumult and facing revolt in Algeria. He granted Algeria its sovereignty. To France’s possessions in west Africa he offered a deal to which their leaders almost universally acquiesced and under which they retained French protection after independence at the price of preserving French economic interests and letting Paris dictate foreign and defense policy.
The French system in Africa, perpetuated primarily by Gaullists after their leader’s death, developed into a network of resource deals, slush funds, and corruption that its moniker neatly summarizes. To the eye, Françafrique reads like a harmless amalgam of France and Afrique, suggesting two peoples joined in common cause. Spoken aloud, however, it conjures something closer to the truth: France à fric—a play on the French for “cash,” which might be loosely translated as “France’s cash machine.”
In the late 1990s an indefatigable investigative magistrate in Paris called Eva Joly followed the thread of some dubious transactions and discovered a huge, hidden pipeline of dirty money running through the African arm of Elf, the French state oil company.
Elf’s division in Gabon was the center of this unknown world. It used oil money to pay bribes to French politicians, buy luxury apartments in Paris, and swell the fortune of Omar Bongo, under whom the Gabonese endured abysmal living standards while their rulers were reputed to have made the country the world’s biggest per capita consumer of champagne.
Total, the privatized successor to Elf, which ranks alongside Exxon Mobil, BP, Shell, and the other giants of the industry, holds some of the best oil rights in Angola and Nigeria, the continent’s two top crude producers, and still pumps oil in Gabon.
The core of China’s offer to Niger as well as to other African resource states was, as the ambassador explained to me, based on a contrast between Beijing’s munificence and the niggardliness of the old powers.
In Guinea the Anglo-Australian mining house Rio Tinto is developing the vast iron ore deposit at Simandou with the backing of Chinalco, the Chinese state-owned miner that is also Rio’s biggest shareholder. China spends two-thirds of its worldwide outlay on foreign corporate acquisitions in the resources sector.
The Queensway Group’s forays into Madagascar and Niger came to nothing, but they illuminate a key element of its approach: Sam Pa offers pariah governments a ready-made technique for turning their countries’ natural resources into cash when few others are prepared to do business with them. Governments installed by military coups are “starving for funding,” Thiam told me. “These guys come and they say, ‘We will fund you when no one else will.’ If you have the interest of your people and your own survival at stake, you will take that money.”
But China was merely adopting the same sort of resource realpolitik that Washington demonstrated when Condoleezza Rice, Bush’s secretary of state, extended a warm welcome to Teodoro Obiang Nguema, the kleptocrat from Equatorial Guinea who consigns his enemies to the hideous recesses of Black Beach prison but has laid out the red carpet for American oil companies.
Although there was legitimate uproar when a Chinese ship that docked in South Africa was found to contain weapons bound for Robert Mugabe’s regime in Zimbabwe, any notion that China is the sole or even the main source of the oceans of weapons that slosh through Africa is misplaced. One study by two Norway-based academics, based on years of arms import statistics and governance indicators, found that the United States had a greater propensity than China to sell weapons to repressive African governments. The Chinese exported fewer weapons to Africa between 1992 and 2006 than Ukraine did, the study found.
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.”
7 - Finance and Cyanide
According to its charter, the IFC is not meant to lend to companies that can borrow with reasonable terms elsewhere. But since it was set up in 1956 as an adjunct to the World Bank, its role has expanded. The driving force behind the creation of the IFC was Robert L. Garner, a Wall Street banker. The World Bank and the International Monetary Fund, mandated respectively to assist with postwar reconstruction and to ensure stable exchange rates, only worked with governments.
Its role expanded to investing in companies directly and raising its own funds by issuing bonds on international capital markets. It undertook advisory work and funded privatizations. By 2013 it had assets worth $78 billion, a balance sheet that would, were the IFC a normal bank, place it among the top thirty banks in the United States. It consistently makes more than a billion dollars a year in profit from projects in a hundred countries.
By taking a minority stake in publicly traded companies, the IFC could expect dividends like any other investor. But, despite its efforts to look and act like a private investment bank, the IFC’s mandate is to influence those companies’ behavior. Minority investors, however, have little such influence. With its Lonmin investment and elsewhere the IFC was putting taxpayers’ money at the service of large, private oil and mining companies whose primary concern was to enrich their shareholders and over which the IFC held little sway.
It was a moment when the stewards of the global economic order — the World Bank, the IMF, and the World Trade Organization — were coming under unusually forceful scrutiny. The previous year tens of thousands of protesters had descended on the WTO summit in Seattle, denouncing it as the patsy of global capital and fighting pitched battles with riot police.
Nine months after Salim published his report the World Bank’s management published its response. It proclaimed that it had “considered these recommendations seriously” and then proceeded to ignore almost all of them.
Bank’s Department for Institutional Integrity, its in-house corruption watchdog.
Four decades after Ghana, in 1957, became the first African colony to win independence, Ashanti Goldfields became the first African company to list its shares on the New York Stock Exchange.
It is a pittance compared with 45 to 65 percent that the IMF estimates to be the global average effective tax rate in mining.
What governments lose under generous deals with resource groups is frequently made up by foreign aid, which constitutes a significant share of many resource states’ income — effectively subsidizing private oil and mining companies with taxpayer funds from donor countries.
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.
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.
Noting that “tax policy is at the core of countries’ sovereignty,” the OECD called for “fundamental changes” to the ways in which multinationals are taxed.
Bermuda topped the chart with a profit-to-GDP ratio of 647.7 percent. At this point the notion that multinationals that use tax havens apportion profits fairly becomes absurd: the total profits declared by American companies were several times the size of each tax haven’s entire economy. The United States alone is losing as much as $60 billion a year to tax dodges based on income shifting, according to estimates Gravelle cited — and the United States probably has the most advanced system to enforce payment and hunt down tax evaders.
Global Financial Integrity, a Washington-based pressure group that has helped propel multinational tax avoidance into the political debate, estimates that illicit outflows from the developing world amounted to $947 billion in 2011 and $5.9 trillion over the preceding decade. Four in every five dollars of those flows were due to trade mispricing, when companies manipulate the prices at which they sell goods and services, either between their own subsidiaries or in transactions with other companies; the rest was the proceeds of corruption, theft, and money laundering.
For decades the Bank and the Fund enjoyed unchallenged positions as the arbiters of orthodox economic policy in Africa. They could ram home their arguments by controlling the flow of loans. Sometimes they were right, sometimes they were catastrophically wrong, but their sway scarcely wavered. In recent years, however, that influence has been punctured by the rise of China, a power that can match the old institutions in financial firepower but is prepared to ask far fewer questions in exchange for influence over the management of African governments’ oil and mineral resources.
As they were poring over Angola’s accounts, the IMF’s economists noticed a discrepancy in the numbers. They totaled up all the revenue Angola should have received — mostly from oil sales — between 2007 and 2010 and compared the figure with how much had actually arrived at the treasury. The gap between the former and the latter was enough to make even seasoned IMF officials’ jaws drop: $32 billion. Even once much of the missing money had been traced to Sonangol’s web of financial dealings, $4.2 billion was still completely unaccounted for.
Norway’s sovereign wealth fund is arguably the main reason it has been able to dodge the resource curse — by keeping most of its oil revenues well away from the budget, to be invested for posterity, rather than inflicting Dutch Disease on the economy and allowing the political elite of the day to reward its cronies with fast cash.
8 - God Has Nothing to Do with It
Along with military men and politicians, Farah Dagogo and his fellow warlords were captains of the trade in stolen crude oil known as “bunkering.” Usually working by night, with the dank air and lapping waters of the creeks making their hands slippery as they smashed open the pipelines that snake through the Delta like black veins, bunkering gangs used two techniques: siphoning oil from a functioning pipeline (“hot-tapping”) or blowing up the pipe and carting off the crude that spills out (“cold-tapping”). The trade was highly lucrative, even if its practitioners risked incineration. The UN estimated that, with a turnover of $2 billion a year, Nigeria’s illicit oil rackets matched the west African cocaine trade in value.
At the peak of its campaign MEND curtailed Nigeria’s oil production by 40 percent, equivalent to cutting off the entire oil production of the UK.
Umaru Yar’Adua lured the warlords from the creeks with the classic bargain of the rentier state: pledge yourself to the status quo, and we shall cut you in on the resource money.
The problem, Sule declared, was that Nigeria’s political leaders had departed from the golden rule that Ahmadu Bello, the Sardauna of Sokoto and elder statesman of the North at independence, had imparted to his protégés, Sule among them: “Sardauna used to tell us that you can’t be running and scratching your buttocks at the same time. You have to do one or the other. You can’t be in government and do business at the same time. He said, ‘Any of my ministers that is interested in business should resign.’”
In resource states ethnicity takes a terrible form. As resource rents beget a ruling class that is not accountable to the people, power is maintained through patronage. Public service is largely abandoned. With no record of service to point to, politics becomes a game of mobilizing one’s ethnic brethren. For us to win, they have to lose. The social contract is replaced with a compact of violence.
“No crisis in Jos is religious,” Kaigama told me. “You get some religious leaders on both sides who use their preaching to say, ‘They are the enemy.’ The real issue is the competition for who owns Jos. It’s ethnic and political.”
As part of a slush fund worth some $180 million deployed over ten years to 2004, the kickbacks helped to win KBR contracts to build one of Nigeria’s biggest oil facilities, the $6 billion liquefied natural gas plant at Bonny Island, on the lip of the Niger Delta. At the time KBR was a subsidiary of the American engineering giant Halliburton, whose chief executive, Dick Cheney, departed in 2000 to be George W. Bush’s vice president.
Other transactions are structured in an effort to enrich officials without crossing the threshold of illegality. In 2011 Shell and the Italian oil company Eni paid $1.3 billion to the Nigerian government for the rights to a choice offshore oil prospect. The government promptly transferred $1.1 billion to an offshore company called Malabu. One substantial shareholder in Malabu was, as a UK High Court judge found in 2013, a man called Dan Etete. Etete, a convicted money-launderer, awarded his own company the rights to the prospect while serving as oil minister under the military dictator Sani Abacha. The deal was described by a fixer involved in the deal as a “safe sex transaction” in which the government served as a “condom” protecting Etete and the oil companies.
Shell would send liaison officers for consultations with the Delta’s inhabitants on the projects they wanted, Arthur told me. Dagogo and Busta Rhymes surreptitiously inserted themselves into the process, sending “fictitious youth leaders, fictitious elders, fictitious women’s groups, fictitious chiefs” to meet Shell’s emissaries. SPDC, Shell’s joint venture with the Nigerian state, keeps a list of the outside companies it has registered as contractors, and only these companies can be awarded contracts to undertake the community development projects that SPDC funds. “So,” Arthur said, “Dagogo and Busta Rhymes formed alliances with some of these contractors and told them, ‘This is the percentage that you will pay us.’”
Shell may be just a company, but it is one of the biggest in the world, richer than many governments. It has been part of Nigeria since before independence. Between 2007 and 2009 it spent at least $383 million on security in Nigeria. The scale of its “community development” spending in the Niger Delta is vast. By the end of 2011 these programs covered 290 communities. Shell’s Nigerian spokesman told me that in 2012 it spent $103 million “addressing social and economic development challenges in the region.”
Jonathan’s victory had been ordained in advance. Each delegate received a cash bribe of $7,000 to vote for him, roughly five times the average Nigerian’s annual income. Bidding for the loyalty of all thirty-four hundred delegates would have cost the Jonathan campaign some $24 million. And that was just the basic payoff — higher-ranking officials could have expected much more. In the days leading up to the primary so much hard currency changed hands in Abuja that the dollar-naira exchange rate moved.
Jonathan presided over a binge of corruption and embezzlement that was dizzying even by Nigerian standards. Nigeria’s pot of oil rent is enormous. Unlike the mining industry, from which African states glean a minimal share of the profits, between 65 percent and 85 percent of the income from oil extraction typically accrues to the governments who license oil companies to pump it. In recent years Nigeria’s annual oil income has ranged between $20 billion and $60 billion, depending on the price of oil and the level of violence in the Delta. The latter figure, for 2011, was one and a half times the profits Exxon Mobil, the world’s most profitable company, recorded that year. Jaw-dropping quantities of these revenues go missing each year and, although the nature of corruption is that it is hard to quantify, the theft appeared to accelerate under Jonathan.
“What we have seen with Boko Haram and all the violence in the country should give politicians pause,” Sanusi went on. “Maybe it’s time to start asking if the very opportunistic identity politics . . . is not endangering the entire system.”
“If you had a government in the UK or the US that could get away with these levels of corruption, they would do it,” Clement Nwankwo, the astute Nigerian political analyst, told me, sitting in his simple office on an Abuja side street. “But there are always institutions. In Nigeria people have not overcome their diversity enough to realize that they could make a difference, they could challenge this fear of authority. They resign themselves to what is. People exploit the divisions: ethnic, religious, regional. They represent themselves as protecting these interests, and they call on their people to protect them. The reality is that the generality of people don’t benefit.”
Chinua Achebe, the late Nigerian writer, wrote in 1983, “The trouble with Nigeria is simply and squarely a failure of leadership. There is nothing basically wrong with the Nigerian character. There is nothing wrong with the Nigerian land or climate or water or air or anything else. The Nigerian problem is the unwillingness or inability of its leaders to rise to the responsibility, to the challenge of personal example which are the hallmarks of true leadership.”
9 - Black Gold
after graduation Moloi went to work as a prospector for Anglo American, the mining house that Ernest Oppenheimer had founded in 1917, which had grown to become the world’s biggest mining conglomerate. After a while Moloi moved to the Oppenheimer family’s diamond company, De Beers.
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.
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.”
Patrice Motsepe, an astute former lawyer with family ties to the ANC who founded African Rainbow Minerals, became South Africa’s first black billionaire.
South Africa’s mineral resources are still by far the world’s most valuable, estimated at $2,494 billion, way ahead of second-place Russia and enough money to buy Apple, Exxon Mobil, and the rest of the nine biggest listed companies in the world.
Under apartheid, when whites made up at most 20 percent of the population, they garnered between 65 and 70 percent of the national income. In 2009, fifteen years after Mandela became president, the richest 20 percent of South Africans garnered 68 percent of the national income; the figure reached 70 percent in 2011. By some measures the gap between rich and poor has widened since the end of apartheid. That is the legacy of apartheid-era urban planning, two-tier education, and countless other lingering distortions of white rule. But it also fits the pattern of inequality that stems from the resource curse.
“Where there is an asymmetrical concentration of political and economic power, the resource economy on the African continent often falls prey to a narrow, extractionist elite whose outlook, despite its democratic pretentions, is feudal, and its behavior more similar to old tribal chiefs than modern government,” Songezo Zibi, who worked in public relations for the mining house Xstrata before becoming one of South Africa’s most incisive commentators and the editor of the authoritative Business Day newspaper, told me.
10 - The New Money Kings
Before he bustled off for a final few laps of the campaign trail I asked him about one of the lesser-known companies doing business in the Marange fields, which I had heard was linked to the Central Intelligence Organisation, Mugabe’s secret police. “It’s the military of China and the CIO,” Mudiwa said. “They are trading diamonds.” The company was called Sino Zim Development. It was part of the Queensway Group.
Until the 1930s South Africa accounted for virtually the world’s entire supply of rough stones. New discoveries elsewhere in southern Africa followed — in Namibia, Angola, and Congo — then in west Africa. In recent decades the trade has broadened, as Russia, Canada, and Australia also became important sources of stones. But Africa still accounts for well over half of the global rough diamond supply.
(Like many African diamonds since, the Cullinan left the continent through subterfuge. After its discovery in South Africa in 1905 it was sent to Britain as a gift for King Edward VII. The heavily guarded steamer ostensibly carrying the stone was a decoy designed to hoodwink potential thieves; the diamond itself went by registered post.)
Campaigners from Global Witness generated such outrage with their investigations of the links between diamonds and war that De Beers’s claims that it had ceased to buy blood diamonds were insufficient to prevent more concerted action. The Kimberley Process, named after the South African mining town that was the scene of the first mining rush in the 1870s, was designed to stop rebel movements like Unita and the RUF from selling diamonds into the world market, either directly or via neighboring states, by ensuring that every rough stone carried a certificate of origin. Drawing together governments, campaign groups, and companies that mined and marketed diamonds, the Kimberley Process was voluntary and often fractious. But its membership grew until it accounted for 99.8 percent of the diamond trade.
The Kimberley Process helped to stem the flow of blood diamonds, but it had a glaring flaw. Its chief targets were rebel movements. Governments that broke the rules were occasionally sanctioned — and risked losing the premium that came with Kimberley certification — but even atrocities such as those that Mugabe’s security forces perpetrated at Marange were not enough to consign a country to the blacklist. In 2011, after the Kimberley Process agreed to certify Zimbabwe’s diamonds, Global Witness withdrew in disgust from the organization it had helped found. “It has become an accomplice to diamond laundering — whereby dirty diamonds are mixed in with clean gems,” said Charmian Gooch, one of the group’s founding directors.
Botswana, where diamonds account for three-quarters of exports, is a rare example of an African state that is rich in resources but has not succumbed to war and grand corruption. In part that is because it is so small — the population is 2 million people, fewer than all but five countries of the African mainland — and relatively ethnically homogenous.
No matter whether they are trading in copper or gold or natural gas, repressive regimes need middlemen to turn their control of resources into money. The diamond industry is peculiarly closed and complex, however, with stones sold either under long-term contracts or at private auctions, their value determined by gauging the aesthetics of refracted light or the relative merits of a hint of pink to a tinge of yellow.
Lev Leviev, the third kingpin of African diamonds, is, like Steinmetz and Gertler, a billionaire and a citizen of Israel, one of the three centers of the diamond trade alongside Belgium and India.
Africa-Israel, a sprawling multinational conglomerate listed in Tel Aviv of which Leviev took control in 1996, has dabbled in everything from bikinis to US petrol stations to the construction of Israeli settlements in occupied Palestinian territory. A devout adherent of the Chabad, a fundamentalist branch of Judaism, Leviev ploughed part of his fortune into advancing the cause, building schools and synagogues and orphanages in Russia and beyond.
Leviev had borrowed heavily to fund the acquisitions and now found himself, in the words of one associate, “on the balls of his ass.” He sought to offload some of the portfolio, and in November 2008 struck a deal to sell his most illustrious property, 23 Wall Street, the former home of J.P. Morgan bank, across the road from the New York Stock Exchange. The buyer agreed to pay $150 million for it, a generous sum in a plunging market. “No one could understand why anyone would pay $150 million for that,” a businessman familiar with the deal told me. “The most optimistic scenario you could create in November 2008 was $75 million.” The buyer was China Sonangol, the joint venture between the Queensway Group and the Angolan state-owned oil company, and the deal was part of a string of transactions that secured for Sam Pa’s network a piece of Wall Street and an entry to the African diamond trade.
A Western businessman who worked with China Sonangol was told that the company was generating $100 million after expenses each month.
In late 2009 Leviev sold China Sonangol his 18 percent stake in Catoca, the Angolan diamond mine that yields stones worth hundreds of millions of dollars every year, for $250 million. China Sonangol had bailed out Leviev’s adventures in Manhattan real estate; now Leviev had made China Sonangol the first Chinese company to own a stake in an African diamond mine.
The archetype of these extractors, those who use the conquest of natural resources to advance political power and vice versa, was Cecil John Rhodes.
Twice when I asked seasoned mining executives in Africa what they made of the Queensway Group, they drew an analogy with Rhodes. “It’s Rhodes all over again... a huge mafia,” said one I spoke to in Zimbabwe.
The power structures of the new resource empires differ from those that the likes of Rhodes built in one striking way: they comprise a lot more black faces at higher levels. There are plenty of examples of African complicity in the exploitation of the continent by foreign powers, from the slave trade onward. The classic imperial ploy, perfected by the British, was to foster a client elite whose authority would be buttressed by London, provided that that elite maintained London’s interests. Today in Africa’s resource states the local potentates are equal partners with the oil executives, the mining magnates, and the globetrotting middlemen.
But these days raising a fully fledged private army is generally deemed beyond the pale. For a would-be latter-day Rhodes, the trick is to forge an alliance with the local purveyors of violence. Sam Pa and the Queensway Group sought out Robert Mugabe’s secret police.
Singapore as a base for its worldwide operations. The companies at the apex of its corporate structure remained registered in Hong Kong, but the city-state across the South China Sea offered many of the same opportunities for corporate secrecy while also allowing the Queensway Group to advance its transition to a fully fledged multinational not tethered to its Chinese and African roots.
As usual, Sino Zim’s ownership looped through the opaque recesses of the financial system. The Singaporean company had two shareholders; both were companies registered in the British Virgin Islands, where ownership is secret but signatories, if they are not one of the agents who each tend to act on behalf of thousands of companies, usually have at least an influence over the company and are likely to own it in part or in whole. The signatory for the company that held 70 percent of Sino Zim’s shares was Lo Fong-hung, Sam Pa’s principal partner, who holds stakes in a score of other Queensway companies. The signatory for the company that held the remaining 30 percent of Sino Zim was a new addition to the Queensway constellation: Masimba Ignatius Kamba, who gave as his address the seventh floor of Chester House in central Harare.
So Ignatius Kamba was using a CIO office with a mandate to spy on trade unionists as his official address for business dealings with the Queensway Group.
J. R. Mailey, an American researcher who was part of the congressional research team that first identified the Queensway Group and coined its name, has developed an encyclopedic knowledge of Sam Pa’s corporate empire.
In April 2014, eight months after Robert Mugabe rigged his way back to total control of a country he had already ruled for thirty-three years, the US Treasury added Sam Pa’s seven names to its list of “specially designated nationals.” The Zimbabwean Sino Zim Development was also added to the list, though not the Singaporean company with the near-identical name. The people and companies on the list are those “owned or controlled by, or acting for or on behalf of” the rulers of countries subject to US sanctions. American companies are prohibited from doing business with them, and their US assets are frozen.
The empires of colonial Europe and the Cold War superpowers have given way to a new form of dominion over the continent that serves as the mine of the world — new empires controlled not by nations but by alliances of unaccountable African rulers governing through shadow states, middlemen who connect them to the global resource economy, and multinational companies from the West and the East that cloak their corruption in corporate secrecy.
EPILOGUE - Complicity
Few made the connection between the debilitating effects of a looting machine that funnels African wealth to the rich world and the inability of the countries where Ebola was rife to fight the virus. By October Ebola and the hemorrhagic fever it induces had visited the most terrifying deaths imaginable on five thousand people in Guinea, Liberia, and Sierra Leone, countries that were tentatively emerging from war and dictatorship. In all three the virus fed off the resource curse, which had helped to enfeeble health services and corrode the state’s ability to safeguard its citizens.
Afterword
It was at the Sofitel, on a Thursday evening in October 2015, that Sam Pa discovered that his guanxi had run dangerously low. It is not clear precisely who led Pa away from the hotel that night. By one account, he was drinking with some contacts from Chinese naval intelligence when the operatives arrived. They do not appear to have been from the police, nor indeed from any of the state security agencies. Most likely, they were emissaries from the Party itself, probably its Central Commission for Discipline Inspection, an agency whose name makes those familiar with its methods shudder. As I write, no one I have spoken to can say categorically what has become of Pa.
When one of its most adept operators falls, the looting machine can appear fragile. If it is no more than a loose affiliation of chancers, schmoozers, wildcatters, and bent politicians, held together by bribes, handshakes, complicity in corruption, and the fickle loyalty of kleptocrats, then it will gradually fall apart.
Elsewhere, fragile democratic institutions are crumbling. In Congo, Joseph Kabila’s apparent attempts to extend his rule beyond its constitutional limit have already caused the electoral timetable to slip. He is part of a growing trend among African nations where the looting machine operates: like Kabila, the rulers of Burundi, Rwanda, and Congo-Brazzaville have either ignored term limits designed to prevent dictatorship or look to be trying to do so.
In a speech in Singapore in July, David Cameron noted what everyone who understands the global financial laundry already knew: that properties in London “are being bought by people overseas through anonymous shell companies, some with plundered or laundered cash.” He plans a corruption summit in 2016. That will mark a test of whether he can deliver on a promise to push Britain’s crown dependencies and overseas territories — which include islands in the Caribbean and English Channel that rank among the world’s most secretive tax havens — to create registries of “beneficial ownership.” That would reveal for the first time the identity of the many thousands who have hitherto been able to incorporate companies there in anonymity — provided, that is, that the registries themselves are made public.
But what if companies were subject to a duty of care to prevent corruption? Imagine a criminal offense that made a company liable if it proceeded with a transaction without having identified the ultimate beneficiaries of its target or prospective partner and if that transaction were subsequently shown to have enriched officials. The company would be treated before the law as though it had knowingly concocted a corrupt scheme. At a stroke, one of the chief conduits for corruption would be stoppered.
Corruption and money laundering have a way of evolving, and doubtless would do so again, but that is no reason not to try to stamp out each mutation.
Dos Santos’s security forces threw a group of young Angolans in jail. For months, they were held without charge, before being released to house arrest. One of them, a rapper called Henrique Luaty da Silva Beirão, spent thirty-six days on hunger strike. Eventually, the state brought charges of conspiring to overthrow the president. Their crime had been to attend a political reading group and to study a particular text. It was a manual on nonviolent resistance, written in 1993 by Gene Sharp, an American science professor, called From Dictatorship to Democracy.