Mugabe surrendered Zimbabweans’ US$2.76 billion to multinational corporations through “illicit financial flows”

An eye-opening report released by the Washington, D.C.-based Global Financial Integrity in December 2015 reveals an inconvenient truth: Between 2004 and 2013, Robert Mugabe's Zimbabwe lost a staggering US$2.76 billion to multinational corporations through "illicit financial flows".

by: Obert Madondo |  | Published May 4, 2017, by The Zimbabwean Progressive

Zimbabwe President Robert Mugabe at the 12th African Union Summit in Addis Ababa, Ethiopia, on February 2, 2009. (Photo credit: Wikipedia)

The popular anti-Robert Mugabe narrative we’re all used to now dictates that the Zimbabwean dictator is solely responsible for decimating what was once considered Africa’s most promising economy. We’re expected to uncritically cling to the notion that Mugabe and his corrupt Zanu PF government are solely responsible for the failure of Zimbabwe’s vast mineral resources to benefit Zimbabweans.

An eye-opening report released by the Washington, D.C.-based Global Financial Integrity in December 2015, entitled, “Illicit Financial Flows from Developing Countries: 2004-2013” (pdf), reveals an inconvenient truth: Between 2004 and 2013, Mugabe’s Zimbabwe lost a staggering US$2.76 billion to multinational corporations through “illicit financial flows”. How significant is the loss? Zimbabwe’s current national budget is about US$4 billion.

According to the “Illicit Financial Flows” report, Zimbabwe’s loss was part of a combined US$675 billion sub-Saharan Africa lost to multinational corporations through illicit financial flows. Furthermore, the GFI says the figure is “highly conservative” as it excludes the “movements of bulk cash, the mispricing of services, or many types of money laundering.”

The World Bank lists the following key points relating to illicit financial flows:

  • “Money illegally earned, transferred, or used that crosses borders” is the most common definition of illicit financial flows (IFFs).
  • IFFs reduce domestic resources and tax revenue needed to fund poverty-reducing programs and infrastructure in developing countries; accordingly, they are receiving growing attention as a key development challenge.
  • IFFs reduce resources, but they are also symptomatic of other issues that constrain poverty reduction and shared prosperity, such as vested interests and weak transparency and accountability.

The Tax Inspectors Without Borders website states: “Domestic resources are the largest and most important source of financing for development. They are country-owned and are more stable than external sources of finance. Domestic resources are the best way to support long-term economic growth and poverty reduction.”

Where did Zimbabwe’s US$2.76 billion go?

“Illicit financial outflows from developing countries ultimately end up in banks in developed countries like the United States and United Kingdom, as well as in tax havens like Switzerland, the British Virgin Islands, or Singapore,” the GFI says on its website. The organization’s researchsuggests that about 45% of illicit flows end up in offshore financial centers, and 55% in developed countries.”

Contrary to the emotive anti-Mugabe narrative, the Zimbabwean dictator remained useful to foreign corporations even after he rightly became a global pariah in the early 2000s. In fact, Mugabe has always been, and remains, useful to foreign corporations. The US$2.76 billion he surrendered to multinational corporations through “illicit financial flows” does not include the millions in profits these corporations extract from Zimbabwe every year.

What’s interesting here is: Even Mugabe, the most anti-west foreign leader living today, can’t escape the power politics and African dilemma Walter Rodney captured in 1972 in “How Europe Underdeveloped Africa,” a book that debunks the European fairy tale of saving Africa. The Guyanese academic-activist suggests that Africa’s famed problems are the result of deliberate policies of exploitation by former colonial powers.

The exploitation did not end with the demise of racist colonial rule. In the past three decades, Zimbabwe and many African countries have adopted neoliberal policies dictated by the World Bank, International Monetary Fund and other powerful international financial institutions. Mugabe’s version, the 1990s Economic Structural Adjustment Programme (ESAP), forced Zimbabwe to drastically reduce public expenditure while creating ideal conditions for unfettered capitalism. Mugabe surrendered Zimbabweans’ US$2.76 billion to foreign corporations after he became a pariah. Even as he released one anti-west tirade after another.

The “Illicit Financial Flows” report is not the first document to highlight illicit financial flows out of Africa. In 2013, the African Development Bank Group stated:

For over 30 years (1980-2009), close to US$1.4 trillion were drained out of Africa. Most of those capital flights were illegal in nature and were due to corruption, kickbacks, tax evasion, criminal activities, transactions of certain contraband goods, and other illicit business activities across borders.

For decades now, multinational corporations have been bleeding African economies, depriving them of the resources needed to support economic growth, education, and poverty reduction efforts.

Democracy no panacea

Often accompanying the dictatorial anti-Mugabe narrative is the “democracy” argument. Democracy’s eventual arrival in Zimbabwe will solve the Southern African country’s problems, the argument goes. Illicit financial flows do not respect democracy. South Africa is often cited as a model of democracy in Africa. According to the “Illicit Financial Flows” report, our neighbour to the south lost US$209 billion to illicit financial flows between 2004 and 2013.

Tanzania regularly holds elections. It provides just about the right conditions for foreign direct investment. In April 2016, Canada’s authoritative Globe & Mail newspaper reported that Acacia Mining, an African subsidiary of the Canadian mining giant Barrick Gold Corp., “engaged in a ‘sophisticated scheme of tax evasion’ to dodge more than $40-million (U.S.) in corporate taxes” in Tanzania. According to the Globe, a tribunal headed by a High Court judge found that Acacia Mining “failed to pay any corporate taxes in Tanzania from 2010 to 2013 while still paying more than $400-million in dividends to its shareholders from its gold-mining profits in the East African country.”

“Donations from west mask “$60bn looting” of Africa

Raising the issue of illegal capital flights from Africa and “kickbacks, tax evasion, criminal activities, transactions of certain contraband goods, and other illicit business activities” by foreign corporations operating in Africa with friends here in Ottawa and online often meets this line: the west gives millions to Africa every year through foreign aid and charitable donations. While NGOs play a central role in Africa’s development efforts, emerging evidence points to a few inconvenient truths we cannot afford to ignore. Most international NGOs operating in Africa today advance the neoliberal agenda proposed by western governments and international financial institutions. Importantly, some are actively facilitating the ongoing bleeding of African economies by multinational corporations.

In 2014, the Guardian (UK) reported that donations from western countries mask the “$60 billion looting” of Africa by foreign multinational companies. According to the publication’s report, “Aid to Africa: Donations from west mask ‘$60bn looting’ of continent“:

Western countries are using aid to Africa as a smokescreen to hide the “sustained looting” of the continent as it loses nearly $60bn a year through tax evasion, climate change mitigation, and the flight of profits earned by foreign multinational companies, a group of NGOs has claimed.

Although sub-Saharan Africa receives $134bn each year in loans, foreign investment and development aid, research released on Tuesday by a group of UK and Africa-based NGOs suggests that $192bn leaves the region, leaving a $58bn shortfall.

The report says that while western countries send about $30bn in development aid to Africa every year, more than six times that amount leaves the continent, “mainly to the same countries providing that aid”.

The inconvenient truth is: For at least three decades now, Africans have been giving to the west more than they’ve been receiving through foreign direct investment (FDI), official aid, and charitable donations.

We’ve been witnessing various manifestations of Rodney’s theory of deliberate policies of exploitation by former colonial powers and their allies, haven’t we? Western foreign aid is no longer just about poverty reduction in poor countries. In recent years, many aid giving countries, particularly Canada and the UK, have tied their foreign aid for Africa to domestic private companies involved in extractive activities on the continent.

An internal analysis of Canada’s bilateral aid programs produced by the former Canadian International Development Agency (CIDA) before the agency’s merge with the Department of Foreign Affairs and International Trade (now Global Affair Canada) in 2014 confirmed that “commercial motives” now drive Ottawa’s foreign aid policy, according to the Globe & Mail. Natural Resources Canada recently confirmed through its “Information Bulletin, December 2016” document that Canada’s mining assets in Africa were worth $31.3 billion in 2015. Canada is one of the key beneficiaries of the billions being stolen from Africa every year through heavy resource extraction and illicit financial outflows.

Post-Mugabe Zimbabwe

Mugabe’s departure is imminent. He will be defeated during the much-anticipated 2018 elections. Is there hope that, after his departure, Zimbabwe’s vast natural resources will result in increased spending on social policies? Not as long as foreign corporations “investing” in Africa continue to prioritize profits over the humanity of Africans. Not along as western governments remain unwilling to shut down their tax havens and regulate their corporations’ activities in Africa. The World Bank states that “curbing IFFs requires strong international cooperation and concerted action by developed and developing countries in partnership with the private sector and civil society.”

Mugabe’s defeat in 2018 changes nothing. His corrupt Zanu PF regime will be replaced by a corporate friendly government. Every major opposition party vying to dislodge Zanu PF from power currently proposes a post-Mugabe economy that favours unfettered global capitalism. As long as these parties continue to offer no guarantees that the imminent accelerated extraction of Zimbabwe’s natural resources will result in increased spending on social policies, there is no reason to doubt that post-Mugabe Zimbabwe will be unfettered global capitalism’s newest playground. We need to muster the courage to talk about the coming massive plunder of Zimbabwe’s resources after Mugabe’s departure.

Obert Madondo is an Ottawa-based blogger, activist, photographer, digital rights enthusiast, and former international development administrator. He’s the founder and editor of these blogs: The Canadian ProgressiveZimbabwean Progressive, and Charity Files. Follow him on Twitter: @Obiemad

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Obert Madondo
Obert Madondo is an Ottawa-based blogger, photographer, activist, digital rights enthusiast, former political aide, and former international development administrator. Obert is the founder and editor of The Zimbabwean Progressive and The Canadian Progressive, both of which are independent political blogs dedicated to producing fearless, evidence-based, adversarial, unapologetic, progressive and activism-oriented journalism situated right at the intersection of politics, technology and human rights. Follow Obert on Twitter: @Obiemad