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Steal Crown Jewels
How to steal the Crown Jewels.
Many people who watch Africa cannot understand how poor countries can
sustain leaders who rapidly become some of the richest people on earth.
How
do they do it?
Take Mobutu in the Congo, he was estimated to have accumulated a
personal
fortune of over US$4 000 000 000.00. This huge sum could have almost
paid
off the international debts of the country at the time. Then one of the
last
Military leaders in Nigeria accumulated a fortune at the astonishing
rate of
over a billion US dollars a year during his tenure. That is US$2,7
million
dollars a day!
The new leader of Mozambique, one of the poorest countries on earth, is
not
only a long time Marxist but is now the richest man in the country.
Even in
chaotic and impoverished Angola, the leadership lives in a lavish
manner and
has enormous sums of money stashed in secret overseas accounts. Just
how is
this sudden wealth achieved?
First of all they do it very secretly - using their power at home to
withhold the information from the watching eyes of the media. Secondly
they
do it with the connivance of overseas banks and financial agencies that
specialize in looking after such wealth and in keeping it out of sight.
It helps if you have oil. It is now a known fact that a third of
Angola's
oil revenues (about US$3,5 billion a year) finds it way into the
personal
accounts of the powerful elite that runs the country. But what is less
well
known is that these same people take a cut on just about everything
that the
country buys. These funds are paid with the full knowledge of the
authorities in the paying countries and go into a network of accounts
with
foreign banks so complicated that they would make Bill Gates proud.
But the main mechanism used is that wonderful invention of the Breton
Woods
agreements and the West - the Reserve Bank and the Ministry of Finance.
No
tribal Chief ever invented such a simple mechanism for milking the
people
and enriching the powerful.
In Zimbabwe, the Zanu PF regime has been using these institutions for
years
to line their pockets and entrench their power. Just take a few
examples.
Foreign exchange inflows from official sources run at about US$33,5
million
a week. The real value of this flow of resources is about Z$340
billion. In
fact the State only pays out via the Reserve Bank Z$200 billion leaving
a
hidden surplus value of Z$140 billion a week or Z$7,3 trillion a year.
That
is Z$650 000 a year for every Zimbabwean in the form of a hidden tax.
Then take another favorite collecting point - gold sales. Zimbabwe is
about
the 6th largest gold producer in the world. Not much after South Africa
and
Russia or Australia, but still significant at about 35 tonnes a year.
The
law in Zimbabwe, as in all African States, says that producers must
sell
this to the Reserve Bank at a price fixed in local currency. So about 1
million Zimbabweans slave away digging gold out of the harsh soil and
then
sell this (about two thirds are sold to the Reserve Bank - the rest is
smuggled out) for a set sum in Zimbabwe dollars printed by the Reserve
Bank.
This payment in recent years has been well below its real value as
determined by the market for gold and the local market for the Zimbabwe
dollar.
Cheap gold not only implies another tax - valued last year at about
Z$1,7
trillion but also an internationally convertible source of hard
currency. It
can be sold in international markets or hidden in overseas bank vaults.
Whatever the Reserve Bank does with its gold purchases the effect is to
convert real value into paper money with a rapidly declining value.
These two simple mechanisms are used to steal money from ordinary
people.
They are part of the reason why inflation is so high and the value of
our
currency falls by the day. In one sense they constitute a hidden tax,
in
another they are a major source of corruption and patronage. This
explains
how people closely connected to the ruling Party are able to accumulate
wealth very rapidly. It also explains the need for secrecy in Reserve
Bank
dealings and in foreign exchange matters.
In Zimbabwe it also explains why the new Reserve Bank Governor has used
his
very considerable influence and power to criminalize the parallel
market for
foreign exchange. For this reason many business persons, whose business
could not have survived in recent years without certain open market
activities, have found themselves under investigation and many have
paid
huge bribes to escape further punishment. Others have been imprisoned
and
many of Zimbabwe's brightest and best have fled the country, leaving
behind
considerable corporate holdings and assets. There is much evidence that
the
Governor himself - in his capacity as the State Presidents personal
banker
and the CEO of a major commercial Bank has undertaken open market
activities, which are today regarded as criminal acts. The selective
use of
investigation and punishment is again typical of such regimes in
Africa.
But the ripple effects of activities of this nature spread very wide.
In
South Africa there is clearly a deliberate policy to over value the
Rand.
This then enables the newly powerful to use the Rand - which can be
printed
for a fraction of its face value, to buy assets cheaply. This is the
underlying mechanism being used to transfer assets to the new elite. At
the
same time a strong Rand counters the inflationary pressures created by
the
rather loose monetary policies that this requires. But the impact of
the
strong Rand on all exporters and on manufacturing is serious and
damaging.
It is hindering job growth and undermining the traditional pillars of
the
South African economy.
In Zimbabwe the same policies - pursued with reckless abandon by this
regime, has called the death knell for major exporters such as the
mining
industry and agriculture. It cost over Z$60 million to grow a hectare
of
tobacco this year - the farmers will be paid about US$2 per kilogram
and
this will translate at present exchange rates into Z$36 million
dollars. A
quick way to go bust, even if you got your land and all the assets on
it for
nothing from a criminal regime.
Eddie Cross
Bulawayo, 22 February 2005.
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