Tyler Cowen Goes to Lagos

MR’s Tyler Cowen (also Professor of Economics at George Mason) recently spent six days in Lagos. Here is what he has to say about Africa’s biggest and most economically dynamic city:

A trip is often defined by its surprises, so here are my biggest revelations from six days in Lagos, Nigeria.

Most of all, I found Lagos to be much safer than advertised. It is frequently described as one of the most dangerous cities on earth. Many people told me I was crazy to go there, and some Nigerian expats warned me I might not get out of the airport alive.

The reality is that I walked around freely and in many parts of town. I didn’t try to go everywhere or at all hours, and I may have been lucky. Yet not once did I feel threatened, and I strongly suspect that a trip to Lagos is safer than a trip to Rio de Janeiro, a major tourist destination. (In my first trip to Rio I was attacked by children with pointed sticks. In my second I found myself caught in a gunfight between drug lords). Many Lagos residents credit the advent of closed-circuit television cameras for their safety improvements.

So if you’re an experienced traveler, and tempted to visit Africa’s largest and arguably most dynamic city, don’t let safety concerns be a deal killer.

Read the whole thing here.

I have never been to Lagos, and look forward to fixing this in 2017. So far my experience of West African (commercial) capitals is limited to Dakar, Accra, Lome, Conakry, Nouakchott and Monrovia (I like them in that order). Dakar edges Accra only by a whisker, mostly on account of the seascape. I have spent way more time in Accra, and therefore my ranking might also be a function of my knowledge of Accra a little too well.

Accra beats all other cities on food. It has the most variety, and nearly all of the offerings beat the bland stuff that we East Africans consume. The grilled tilapia and banku is unbeatable.

Oh, and I must admit that I have a slight preference for Senegalese jollof. My wife insists that Ghanaian jollof is the best jollof (ahead of both the Nigerian and Senegalese variations). I look forward to sampling Naija jollof so we can finally settle this disagreement.

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Old Habits Die Hard: Rio Tinto allegedly bribed government officials in Guinea

Regular readers may recall that in Simandou Guinea has one of the richest iron ore deposits in the world; and that it is a development project that I have been following for a while.

You may also recall the infamous story of how Israeli tycoon Benny Steinmetz paid nothing for exploration rights in a half of Simandou, proceeded to invest about $160m in developing the mine, only to flip it a couple of years later for $2.5b. The Brazilian mining giant Vale was the unfortunate victim of Steinmetz’s scheme.

According to The Intercept:

An investigation by the current government of Guinea found that a shell company controlled by BSGR paid at least $2.4 million to Mamadie Touré, a wife of the former dictator [Lansana Conte], in return for her help in acquiring the rights to the mine for BSGR. Earlier this year the government annulled BSGR’s stake in the mine, saying the firm had obtained it through corruption.

Others on the payroll included then Minister for Mines, Mahmoud Thiam, who preferred to spend his earnings on a Lamborghini, an apartment in Manhattan (%1.5m), and an estate in Dutchess County ($3.75m). All paid for in cash. After the death of President Lansana Conte and the election of Alpha Conde, the government of Guinea successfully repossessed the mine from Vale and vowed to clean up the mining sector.

But old habits die hard.

It now emerges that President Alpha Conde, who successfully managed to get the illegally acquired half of Simandou, was himself allegedly paid about $10.5m in bribes to secure Rio Tinto’s rights to the other half.  May be I am too naive, but are these side payments enough to give away billions of dollars worth of value? It is sad enough that Conde may have taken the bribe. But it is doubly disappointing that his price was so low.

Why don’t people like Conde and Thiam think of setting up their own mining companies, or contractors to the global giants?

How does one begin the process of inculcating a sense of an encompassing interest in an otherwise rapacious elite?

Here is the story from the FT:

Rio Tinto’s lawyers uncovered more than a year ago internal emails about a questionable $10.5m payment to a consultant, but the mining company did not alert law enforcement authorities and investors about the matter until last week. The Anglo-Australian group said on November 9 that it had notified authorities after discovering emails from 2011 that referred to the payment to the consultant, who helped head off a threat to Rio’s claim to the giant Simandou iron ore project in Guinea.

In the emails, seen by the Financial Times, Alan Davies, the executive in charge of Simandou, discusses with Tom Albanese, then chief executive, and Sam Walsh, then head of iron ore, paying a $10.5m fee to François Polge de Combret, a former top French banker and classmate of Guinea’s president. Following an internal inquiry begun in August, Rio said last week that it had referred the matter to law enforcement authorities in the UK, the US and Australia. The company now faces years of scrutiny and the risk of large fines if it is found to have broken anti-corruption laws.

In another section:

The dispute over Simandou dates back to 2008, when the Guinean dictator of the day stripped Rio of the rights to the northern half of the project and handed them to BSG Resources, the mining arm of Israeli diamond tycoon Beny Steinmetz’s family conglomerate. BSGR went on to agree a $2.5bn deal to bring in Vale of Brazil as its partner.

In 2011, Rio secured its claim to the remaining half of Simandou with a $700m payment to the then new government of President Alpha Condé — a deal which, the emails indicate, Mr de Combret helped to facilitate. The ex-Lazard banker declined to comment.

Several African public figures (and associates) mentioned in the Panama Papers

The Guardian has an excellent summary of what you need to know about the Panama Papers, the data leak of the century from the Panama-based law firm Mossack Fonseca.The firms specializes, among other things, in incorporating companies in offshore jurisdictions that guarantee secrecy of ownership.

Here is a map of the companies and clients mentioned in the leaked documents (source). Apparently, the entire haul (2.6 terabytes of data) has information on 214,000 shell companies spanning the period between 1970 to 2016.

Screen Shot 2016-04-03 at 9.41.32 PM

The leaked documents show links to 72 current or former heads of state and government. So far the highest-ranking public official most likely to resign as a result  of the leak is the Prime Minister of Iceland, Sigmundur Gunnlaugsson (see story here and here)

For a list of African public officials mentioned in the leaked documents see here. And I am sure we are going to hear a lot about all these rich people in developing countries.Screen Shot 2016-04-03 at 9.18.42 PM

Closer to home, the Daily Nation reports that Kenya’s Deputy Chief Justice, Kalpana Rawal, “has been linked to a string of shell companies registered in a notorious Caribbean tax haven popular with tax dodgers, dictators and drug dealers.” Justice Rawal has been dodging retirement for a while. May be after the latest revelations might find a reason to call it quits.

The ICIJ website has neat figures summarizing some of the findings from the massive data haul. Also, here is a Bloomberg story on the tax haven that is the United States.