Mineral Assets and Corruption in the DRC: Israeli “businessman” Dan Gertler linked to Och-Ziff bribery convinction

What does Dan Gertler and his business associates think of term limits in the DRC?

This piece from The Globe and Mail has some answers:

The cellphone message from the Israeli businessman was blunt and vulgar: The Canadian mining company must be “screwed and finished totally,” he told an associate as they negotiated a massive bribe to Congolese court officials to guarantee that the Canadian company would lose control of its copper mine.

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President Joseph Kabila and Dan Gertler 

Within hours of that 2008 message, the businessman and his associate had arranged a bribe of $500,000 (U.S.) to judges and other officials in the Democratic Republic of the Congo, according to court documents released in a U.S. corruption case.

A day later, the Israeli businessman obtained assurances that Congolese officials would ensure the Canadian company would lose its court fight against a local takeover of the copper mine, the U.S. documents say. Then, a week later, the Israeli won majority control of the company and the valuable asset.

The documents were released on Thursday in the settlement of a corruption case against Och-Ziff Capital Management, a U.S. hedge fund that manages $39-billion.

Och-Ziff agreed to pay $412-million in criminal and civil penalties, one of the biggest payments ever approved under the U.S. Foreign Corrupt Practices Act.

The U.S. documents show the hedge fund paid more than $100-million in bribes to officials in Congo, Libya, Chad, Niger and Guinea – including Congolese president Joseph Kabila – to gain corrupt influence and mining assets.

……. The hedge fund, Och-Ziff, went into partnership with the Israeli businessman and was involved in using intermediaries and business partners to funnel large bribe payments to officials in Congo and other African countries, according to the U.S. Securities and Exchange Commission. Och-Ziff was directly involved in financing the businessman’s acquisition of Africo, including his “legal expenses” in the case, the U.S. documents say.

As I have noted here and here, the DRC is a cherished playground for thieves foreign investors who do not give a rats behind about the political, institutional, and economic consequences of their actions.

That said, Gertler would be advised to talk to Benny Steinmetz. There is a precedent of a change in leadership leading to repossession of a fraudulently obtained concession.

Kabila will not be in power in Kinshasa forever.

More on the Och-Ziff story here.

Political Developments in the DRC

Podcast: Renowned Africanist historian Crawford Young talks with Jason Stearns about politics in the Democratic Republic of Congo.

It looks like Joseph Kabila may be able to extend his stay in office at least until 2018. The constitution bars him from being in office beyond 2016.

The decision to extend Kabila’s stay in office is likely the beginning of a bloody phase in the DRC’s political saga. Opposition groups claim that at least 50 people have died since Monday in clashes with the army and police.

Kabila now joins his neighbors Paul Kagame of Rwanda and Denis Sassou Ngwesso of the Republic of Congo as the latest in a small but growing list of African presidents who continue to buck the trend by abrogating constitutional presidential term limits.

This should not come as a surprise to students of political development.

Leadership transitions are notoriously difficult to manage. Especially in relatively shaky states like the DRC. In case it is not obvious, there will not be any easy solutions to the current impasse. Kabila clearly has the support of a sufficient number of elites that want him to stay in power — primarily for their own benefit. Enough that they are willing to send in the troops to kill protesting civilians.

This means that moralizing about Kabila’s disrespect for electoral democracy will not work. It is not just Kabila on the hook here. His domestic elite-level allies and foreign business associates who pillage the DRC’s resources are also on the hook. And they can’t simply be wished away. Furthermore, the ghosts of the Two Congo Wars will likely inform any regional intervention to try and resolve the constitutional crisis. Nobody wants to ignite more killings and instability.

Unfortunately for Congolese people, Kabila and his allies know this. And have revealed that they are willing to blackmail everyone into letting him stay in power.

Why isn’t the East African Community doing more on Burundi?

The situation in Burundi is deteriorating, fast.

Armed-forces-in-Burundi-340x230There are strong signs of ethnic violence. More than 300 people have been killed since President Pierre Nkurunziza successfully violated term limits to stay in office for a third term early this year. The ensuing violence has forced over 220,000 to flee the country, while scores remain displaced internally. Over the last week alone more than 80 people have been murdered in what is increasingly looking like a civil war rather than mere civil unrest met with heavy-handed repression. The African union has used the word “genocide” in reference to the Burundian situation.

For a background on the current Burundian crisis see here, here, here and here.

So given the clear evidence that things are falling apart in Burundi, why isn’t the East African Community (EAC) doing more to de-escalate the situation?

The simple answer is intra-EAC politics (which serve to accentuate the body’s resource constraints).

The EAC is a five-member (Burundi, Kenya, Tanzania, Rwanda and Uganda) regional economic community (REC) that is arguably the most differentiated REC in Africa. Based in Arusha, Tanzania, it is a relatively robust institution replete with executive, legislative and judicial arms.

Like is the case for most African RECs, the EAC member states conceded precious little sovereignty to Arusha. For example, the  EAC treaty does not directly empower the REC to intervene in a member country even in cases of gross violations of human rights (like is currently happening in Burundi). So far regional cooperation within the EAC has mainly focused on economic issues that do not pose substantial threats to sovereignty. It is for this reason that the EAC has avoided any kind of direct intervention in Burundi to end what is a singularly political crisis — both within Burundi and at the regional level.

That said, Article 123 of the EAC treaty provides a loophole for intervention.

The Article stipulates that the purpose of political cooperation among EAC member states is to, among other things: (i) strengthen the security of the Community and its Partner States in all ways; and (ii) preserve peace and strengthen international security among the Partner States and within the Community. In my view these clauses mandate the EAC to protect both the internal security of Burundi as well as intra-EAC security.

It is important to note that so far the norm has been to treat vagueness in African REC treaties as a call to inaction. But vagueness also provides willing interveners with a fair amount of latitude over interpretation. Furthermore, since 2000 the trend within African RECs has been to dilute the infamous OAU non-intervention clauses (see the AU treaty, for example) especially with regard to security matters.

It is not hard to see how the conflict in Burundi poses a clear and present danger to both Burundi’s internal security as well as peace and security within the EAC.

We know from history that an all out civil war in Burundi would threaten the security of the region. Burundi’s ethnic make up roughly mirrors that of Rwanda. Ethnic conflict in Burundi would inevitably elicit an intervention from Rwanda, thereby regionalizing the conflict (with an almost guaranteed knock on effect in eastern DRC). In addition, even though Kagame may not be a fan of Nkurunziza, he lacks the moral authority to criticize him given recent moves to scrap term limits in Rwanda.

If Rwanda (overtly) intervenes in Burundi, it is not clear which side Tanzania — a critical player — would take (especially because of the implications for the stability of eastern DRC). Kigali and Dodoma do not always see eye to eye. In addition, the new Tanzanian president, John Magufuli, is not particularly close to his Kenyan counterpart on account of his closeness to Kenyan opposition leader Raila Odinga. This may limit the possibility of collective action on Burundi by the EAC’s two leading powers.

And then there is Uganda. President Yoweri Museveni is currently the designated mediator in the Burundian negotiation process. But he is currently preoccupied in his bid to win an nth term in office (who’s counting?) His legitimacy as a mediator is seriously in question on account of his political record back home. Recall that the proximate cause of the current crisis in Burundi was Nkurunziza’s decision to violate term limits. Museveni scrapped term limits in 2005 and has systematically squeezed the Ugandan opposition into submission through heavy handed tactics that are direct violations of human rights.

Sadly for Burundians, the current state of inter-state relations within the EAC is strongly biased against any robust intervention to stop the violence that is increasingly becoming routine. Nkurunziza knows this, and will likely try to make an end run on his perceived political opponents before the wider international community begins to pay closer attention.

Lastly, the other possible interveners — the  UN and the EU — are also not likely to intervene in Burundi any time soon, despite the country’s heavy dependence on foreign aid. Europe is hobbled by the ongoing refugee crisis and the war on ISIS. As for the UN, it increasingly launders its interventions through region or sub-regional IOs (see for example AMISOM in Somalia, under the AU). This kind of strategy requires a willing regional partner, something that is lacking in the case of the EAC (or the AU for that matter).

In the next few weeks there will probably be attempts at mediation and calls for a ceasefire. But my hunch is that things are likely to get much worse in Burundi in the short term.

Some Africanist inside baseball

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Quick thoughts on presidential term limits and the political crisis in Burundi

The president of Burundi is about (or not) to join the list of African leaders who have successfully overcome constitutional term limits in a bid to hang on to power. Currently (based on observed attempts in other African countries and their success rate) the odds are roughly 50-50 that Mr. Pierre Nkurunziza will succeed. The last president to try this move was Blaise Compaore of Burkina Faso who ended up getting deposed by the military after mass protests paralyzed Burkina’s major cities.

Successful term limit extensions have so far happened in Burkina Faso (first time), Cameroon, Chad, Djibouti, Gabon, Guinea, Namibia, Togo, and Uganda. Presidents have also tried, but failed, to abolish term limits in Burkina Faso (second time), Malawi, Niger, Nigeria, Senegal, Zambia. Countries that are about to go through a term limit test in the near future include Angola, Burundi, Republic of Congo (Congo-Brazzaville), the Democratic Republic of Congo (DRC), Liberia, Rwanda, and Sierra Leone. Heads of State in Benin, Cape Verde, Ghana, Kenya, Mali, Mozambique, Sao Tome e Principe, Tanzania, and Namibia (after Nujoma) have so far obeyed term limits and stepped down at the end of their second constitutional terms.

To the best of my knowledge only Sudan, The Gambia, Equatorial Guinea, and Eritrea have presidential systems without constitutional term limits. Parliamentary systems in South Africa, Lesotho, Swaziland, Ethiopia, and Botswana do not have limits, although the norm of two terms exists in Botswana and South Africa (and perhaps soon in Ethiopia?).

So what we see in the existing data is that conditional on *overtly* trying to scrap term limits African Heads of State are more likely to succeed than not (9 successes, 6 failures). However, this observation doesn’t tell us anything about the presidents who did not formally consider term limit extensions. For instance, in Kenya (Moi) and Ghana (Rawlings), presidents did not initiate formal debate on the subject but were widely rumored to have tried to do so. So it’s probably the case that presidents who are more likely to succeed self-select into formally initiating public debate on the subject of term limit extension, thereby tilting the balance. And if you factor in the countries that have had more than one episode of term-limited presidents stepping down, suddenly the odds look pretty good for the consolidation of the norm of term limits in Sub Saharan Africa.

I wouldn’t rule out, in the next decade or so, the adoption of an African Union resolution (akin to the one against coups) that sanctions Heads of State who violate constitutional term limits.

So will Nkurunziza succeed? What does this mean for political stability in Burundi? And what can the East African Community and the wider international community do about it? For my thoughts regarding these questions check out my post for the Monkey Cage blog at the Washington Post here.

Correction: An earlier draft of this post listed Zimbabwe as one of the countries without term limits. The 2013 Constitution limits presidents to two terms (with a minimum of three years counting as full term (see Section 91).

On Bad Roads (in pictures)

Even presidents get stuck on bad roads when it rains. Here is President Joseph Kabila of the Democratic Republic of Congo. The DRC has a landmass of 2,267,048 sq km, and 2,794 km of paved roads.

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What can be done to increase road access in the DRC? Big projects like this will definitely help. But a big accelerator of the process will probably be urbanization. Kinshasa is the second largest city in Sub-Saharan Africa, after Lagos. Many of you probably have never heard of Mbuji Mayi, a city of about 1.7 million people (Other big cities in the DRC include Lubumbashi, Kisangani, Bukavu, and Kananga, and Tshikapa).

The projected rapid urbanization rate in Africa, and much of the developing world, is often depicted as a disaster waiting to happen (largely due to poor infrastructure and lack of jobs). But urbanization can also be seen as an opportunity to take advantage of economies of scale to provide public goods at a lower cost. It might even have a positive impact on agricultural productivity – by creating reliable concentrated markets in urban areas and possibility through greater levels of land consolidation to take advantage of scale. That said, governments will still have to build major highways linking cities, and farms with markets.

RIP Tabu Ley (1937-2013)

The Rhumba legend Tabu Ley has passed on. For Kenyans of my generation his songs are a reminder of a childhood marked by our parents’ great love of Congolese music (dominated by Tabu Ley and Franco Luambo Makiadi). Back then Kinshasa seemed like the most fun place on the planet (and probably is/was, as I have never been) and a bustling centre of cultural production. We didn’t know what the songs were about, but we knew the lyrics (or what we imagined them to be). I particularly grew to love “Muzina.”

[youtube.com/watch?v=J2GCPUArIwI]

 

The 2013 Resource Governance Index

The 2013 Resource Governance Index (published by the Revenue Watch Institute) is out. The top performing African countries include Ghana, Liberia?, Zambia and South Africa, with partial fulfillment. The bottom performing countries are Equatorial Guinea, Zimbabwe, South Sudan, the Democratic Republic of Congo and Mozambique.

The 58 nations included in the report “produce 85 percent of the world’s petroleum, 90 percent of diamonds and 80 percent of copper.” Ghana, where we are doing some evaluation  work on extractive sector transparency initiatives, is the best performing African country on the list. Image

More here. 

And in related news, The Africa Progress Report was released last week. The report details the massive loss of revenue by African governments through mismanagement – either by commission and/or omission – of extractive resources. For instance:

The report details five deals between 2010 and 2012, which cost the Democratic Republic of the Congo over US$1.3 billion in revenues through the undervaluation of assets and sale to foreign investors. This sum represents twice the annual health and education budgets of a country with one of the worst child mortality rates in the world and seven million pupils out of school.

The DRC alone is estimated to have 24 trillion dollars worth of untapped mineral resources.

The most bizarre case of resource management in Africa is Equatorial Guinea, a coutnry that is ranked 43rd on the global per capital GNI index but ranks 136th on the Human Development Index (2011).

Below is a map showing flows related to Africa’s vast resources:

RESOURCE-MAP

US Africa Policy, A Response

This is a guest post by friend of the blog Matthew Kustenbauder responding to a previous post.

On the question of human rights guiding America’s foreign policy in Africa, I agree with you; it shouldn’t be the first priority. The US needs a more pragmatic development diplomacy strategy, which would help African countries develop just as it would help American businesses thrive.

But I disagree with your characterization of Hillary’s position in this respect. Here’s Secretary Clinton’s own words:
“Last year I laid out America’s economic statecraft agenda in a series of speeches in Washington, Hong Kong, San Francisco, and New York. Since then, we’ve accelerated the process of updating our foreign policy priorities to take economics more into account. And that includes emphasizing the Asia Pacific region and elevating economics in relations with other regions, like in Latin America, for example, the destination for 40 percent of U.S. exports. We have ratified free trade agreements with Colombia and Panama. We are welcoming more of our neighbours, including Canada and Mexico, into the Trans-Pacific Partnership process. And we think it’s imperative that we continue to build an economic relationship that covers the entire hemisphere for the future.” 
“Africa is home to seven of the world’s ten fastest-growing economies. People are often surprised when I say that, but it’s true. And we are approaching Africa as a continent of opportunity and a place for growth, not just a site of endless conflict and crisis. All over the world, we are turning to economic solutions for strategic challenges; for example, using new financial tools to squeeze Iran’s nuclear program. And we’re stepping up commercial diplomacy, what I like to call jobs diplomacy, to boost U.S. exports, open new markets, lower the playing field – level the playing field for our businesses. And we’re building the diplomatic capacity to execute this agenda so that our diplomats are out there every single day promoting our economic agenda.” 

One of the problems, however, is that the pragmatic approach articulated by the Secretary doesn’t trickle down through the bureaucracy. This is especially true, ironically, of the State Department’s primary development diplomacy arm, USAID, which has a deeply entrenched culture of being anti-business. It’s a huge problem, and part of the reason why American foreign policy in Africa has been so slow to adjust to new economic realities.

Security drives US Africa Policy

Security drives US Africa Policy

Academics schooled in all the latest development orthodoxies but lacking the most basic understanding of economic or business history have flocked to USAID, so that the suggestion that American economic interests should guide development policy – making it a win-win for Africa and America – is anathema. It’s also why the Chinese are running all over the US in Africa.

As a prominent economic historian recently remarked in the Telegraph, “While we [Western governments] indulge our Victorian urge to give alms to the Africans, Beijing is pumping black gold.” And this is just it. As long as the US approaches Africa as a beggar needing to be saved and not as a business partner worthy of attention, both sides will continue to lose out.

In this respect, what Africa does not need is another “old Africa hand” steeped in conventional development ideas and old dogmas about what’s wrong with Africa and why the US must atone for the West’s sins. For this reason alone, John Kerry – not Susan Rice – probably stands a better chance, as the next Secretary of State, at putting American foreign policy toward Africa on a more solid footing.

– Matthew Kustenbauder is a PhD candidate in history at Harvard University.