Does the Anti-Corruption Bureau (ACB) have the capacity to successfully handle all the corruption cases in Malawi?

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Let us be honest, the Anti-Corruption Bureau (ACB) in Malawi is overstretched.

Even before any real big fish have been caught in its net, the ACB appears to be in trouble. Not entirely in a bad way , in fact the ACB is facing the good type of trouble in that never in its entire history has Malawi’s graft busting body have had to pursue so many allegations of corruption made against so many individuals and companies (some of whom are not even Malawian) in such a short space of time.

So, the big questions: Can the ACB cope with all the evidence and allegations currently coming out? I mean, does the Anti-Corruption Bureau (ACB) have the capacity to successfully handle all the corruption cases in Malawi? Will they be able to effectively pursue each lead? And not just arresting suspects who are then subsequently released on bail, but ensuring that arrests end in successful prosecutions that lead to convictions.

I have serious doubts. Already, people are questioning why suspects like Roza Mbilizi and others have been released on bail. Malawians are also asking whether some of these arrests will go down the way of cases such as that against former budget director Paul Mphwiyo – who the High Court in Lilongwe ruled in May that he has a case to answer in relation to the MK2.4 billion Cashgate corruption case. It’s been 6 years, but Mphwiyo is still a free man.

Also, where was the ACB when corruption allegations regarding some of these cases were floating around?

I think for corruption to be effectively tackled in Malawi we need a new institution, one with far-reaching powers, a new mandate and a clear(er) objective.

We need an organisation that is staffed with new blood, that will adopt a new way of thinking and that is not hounded by old allegiances or suspect sympathies. What Malawi needs is a new Anti-corruption body that has zero links or partiality towards political parties; a truly independent institution that is only answerable to parliament, with no entanglements to DPP, PP, UDF, MCP, UTM or any other institution.

Unfortunately, that can’t be said of the current ACB and Reyneck Matemba, the ACB’s current Director General, knows it.

Remember here (external link) how the ACB’s current top sheriff complained about some of the difficulties he faced when pursuing suspects (also see the video below)?

Yes, have all those challenges suddenly gone away?

Of course, no one is suggesting that the ACB should be 100% perfect. But being imperfect should not be an excuse to have sacred cows. Further, with the scale of theft which President Lazarus Chakwera recently estimated to be K1 trillion (over $1.3 billion), you’d think that the bodies tasked with clamping down on corruption are going to be particularly powerful; with dogged prosecutors and an unflinching determination to get to the bottom of every single case.

Further, how likely is it that the ACB can for example concurrently commence court proceedings in the courts of London, Portugal, Switzerland or Qatar against suspects who many Malawians suspect have acquired or hidden the proceeds of corruptions in those countries – by virtue of sudden unexplained wealth which some of those suspects flaunt? The current ACB doesn’t have capacity to manage international parallel corruption probes. They would probably struggle, and it would take months if not years to go after funds that have been externalised.

Let us ask this same question in a different way: Can the ACB start investigating  the houses which certain public figures in Malawi have bought in foreign countries? Houses bought in the UK; the flats and houses bought in the US, the millions that have flowed into South Africa? If so, when will they start following the money trail?

Instead of trying to get answers with an imperfect and compromised body, I believe what is needed is a clean slate. A fresh start. A new beginning: what is needed is the National Fraud Agency (NFA).  

Malawi’s National Fraud Agency (NFA) should have powers to levy fines, powers to cancel contracts which were not signed in the best interests of the country or its citizens, and powers to impound, detain and forfeit goods, and to go after money and foreign property of officials or citizens (which is suspected of being bought using the proceeds of corruption) until the suspect can prove that such funds or property were earned legitimately, and that tax has been paid on them. The organisation should be established specifically to look at the issue of declaration of assets, externalisation of forex, to scrutinise government spending, tender awards and government contracts, and to prevent extortionate prices being charged for goods supplied to the Malawi government or to public agencies.

The NFA can work with the Anti-Corruption Bureau, but it has to be independent of the ACB. Parliament and PAC should establish a framework that decides how the NFA’s powers are to be exercised. This is important to make sure that the theft of public resources that has occured in the past in one guise or another, perpetrated by public officials including ministers, should be firmly and resolutely put to an end.

Thus, Malawi’s NFA would ensure that there is transparency and accountability, and would establish a high standard of ethics in Malawi’s politics. It would also ensure that if wrong-doing does occur, a course of action that swiftly and decisively rectifies the situation can be implemented without delay. It means unscrupulous officials can be cut-off from the business of government sooner than later, and cannot run away abroad with the proceeds of corruption – and feel as though they are beyond the reach of the law. It also means that the onus would be on the suspects to prove that they are innocent, and that their wealth, money earned or property is legitimate, and that they have paid tax on it – in accordance with Malawi’s laws. To take President Lazarus Chakwera’s lingo, it expediates justice on the “dross of sycophants

Of Ethics, Rashid Gaffar & Government sanctioned Extortion

There is one little known Tonga Proverb that says : “Yo waswela mviheni wariyengi”. It translates ~: “A person who delays correcting things will end up crying.” It means that a solution taken earlier on, can save one from a much bigger problem down the line.

This Tonga proverb is relevant because of the recent comments by the new Minister of Mining Rashid Gaffar, who has been embroiled in a scandal involving the sale of buses to former president Peter Mutharika.

For those who are not familiar with this story, here’s a background: Former president, Peter Mutharika, in an attempt to lure voters to vote for his party in the June elections re-run promised to buy state of the art buses for two of Malawi’s biggest football clubs, Mighty Be Forward Wanderers and Nyasa Big Bullets. At the time, Mutharika claimed that he would be paying for the buses with his own money. However, it later transpired that the money for the buses came from the Malawi Government. Further, it was revealed that contrary to popular belief, the buses were sold to the government at nearly twice their price?!

As would be expected, Malawians were outraged. How can the former president lie to Malawians? How could Gaffar, a former DPP member of Parliament for Blantyre Kabula Constituency, agree to sell the buses at an extortionate price, which he knew was nearly twice the market price for the buses? How ethical were his actions? Did Gaffar knowingly overcharge for the buses because DPP functionaries were going to get a backhander cut from the deal? And critically, why did the new president, Lazarus Chakwera, select such a controversial and insenstitive figure to be in his cabinet as minister of mining? So many questions.

What made the situation worse are the comments Gaffar made afterwards when questioned about the deal.

In an interview with the Nation- a local newspaper in Malawi, Rashid Gaffar said that the “desperate” buyer (Mutharika) bought the buses on normal business terms of willing buyer, willing seller, and that Mutharika could have told him “if he were not satisfied with the price.”

He said the story should be to ask the former president if he bought the buses using his own money (as he claimed) or whether he used government money.

He also said “By the way, I have four more buses and they could be sold at an even higher price. Asafuna Asiye”

This smacks of total disregard to the suffering and poverty which many Malawians continue to endure. It shows that Gaffar is not a conscientious person, and does not have the interests of Malawians at heart. It also shows a clear disregard for the servant leadership which President Lazarus Chakwera has been preaching. If anything, it proves that Rashid Gaffar is merely a self-serving businessman and politician who is only interested in profit, and who has no qualms extorting the state, even when millions of poor Malawians are suffering.

These are not the kinds of people to have in your cabinet under the Tonse Philosophy, when you have been talking about tackling corruption. Because what does that say about you and your Government: That you are willing to pay a blind eye to someone who clearly and unmistakably was involved in an extortionate and fradulent scheme, one that overcharged Malawians for personal gain? It’s something which the Tonse Alliance Government may live to regret, if they do not do something decisive immediately to rectify it.

President Lazarus Chakwera and Vice President Saulos Chilima need to critically re-examine Gaffar’s suitability for the Ministry of Mining portfolio. This may not be the last scandal we hear of Gaffar, and I hate to think what else he’ll screw up next, because whatever he does next will simply undermine the government’s agenda, damaging the public’s trust in the Tonse Alliance. And that’s bad for many reasons.

There are many other better qualified, less controversial, more conscientious, and more honourable people, who unlike Gaffar – have integrity, and who can serve in that role, and lead that ministry without such obtuse carelessness: The Tonse alliance government should find them and utilise them fast.

As for Gaffar himself, he needs to return the money he overcharged (K70 million) on each bus back to the government. He also needs to make a public apology. That should restore some sort of dignity and accountability to the Tonse Alliance.

How to ensure that high profile people in Malawi face Justice for their corrupt practices.

While in the last hour news has reached us of the arrest of Peter Mutharika’s aide Norman Chisale, who has been accused of widespread corrupt practices, there have been many complaints over the last few weeks regarding the Anti-corruption Bureau(ACB), the official body tasked with clamping down on corrupt practices in Malawi.

Malawians are dissatisfied with the pace and direction in which the ACB is taking. Many are saying that the authorities are only targeting low-level criminals, while the big fish, the high-profile politicians who have been accused of corrupt practices at one point or another, are not being pursued, or are not being pursued quick enough.

Some people have even said that if high profile criminals are not arrested then those low level people who have been arrested might as well just be released and set free because it’s not fair that only the common people are pursued when it comes to corruption.

Now while building a convincing case against someone accused of corruption can take time, I believe many of us are missing the point.

The scale and level of corruption in Malawi was so deep, so systemic, so perverse, so pervasive, so widespread and so flagrant that the ACB is unlikely to have the human resource to deal with all the complaints that are being unearthed quick enough.


What is needed instead is Citizen Power; Citizen Action, for people to get together and gather the evidence required to build a successful Anti-corruption case. This evidence can then be used by Human Rights organisations to commence Anti-corruption actions in the courts in Malawi, but where the ACB and others can then join as interested parties.

Such a tactic would ensure that no one gets away with wrongdoing, and would force the authorities to pursue people who are perceived to be untouchable, for all sorts of reasons.
Of course ideally the ACB should take the lead in commencing such prosecutions. But when that is not yet possible, in all cases involving high profile suspects, I think it falls on the people of Malawi to do something.

Mind you, it wasn’t the ACB that led the way for the Tonse Alliance Government to come into power. Instead it was Malawians who organised and created a powerful movement that exposed the widespread irregularities which led to the nullification of the 2019 elections. It was the same Malawians who demonstrated day in and day out for 10 months+, culminating in a new election that toppled the corrupt regime of Peter Mutharika.

So we should not abdicate our responsibility to our country, by expecting the impossible from the ACB. This is the same ACB that has failed to to investigate tens of corruption cases over the last 20+ years.
Thus, it is definitively up to Malawians to build convincing Anti-corruption cases against all the figures we believe, who we know or who have good reason, and evidence to believe, stole from Mother Malawi.

Why didn’t successive Malawi Governments act to stop the looting of US$2 billion+ from government accounts?

Photo Credit: Nation Publications Limited
Photo Credit: Nation Publications Limited

Before any talk of a new IFMIS is taken seriously, Malawians need to be told how much money is missing from government accounts, and why successive governments failed to stop the recklessness and impunity that has led to the loss of at least US$2 billion from Malawi Government accounts the last 6 years.

Anything less is simply not acceptable. And I must say that task could have some serious casualties, complete with more blood than seeped out of Mphwiyo’s gunshot wounds.

Lets see, under DPP’s watch at least US$500 million went missing. That’s only from 2009 to 2012. Who knows what happened before that? Who knows how much was lost between May 2004 to December 2008, or even before that during Muluzi’s tenure?  Do we have the audits going back all the way? Should we have such audits so that there is full accountability? In any case, if there is no accountability how can the system be fixed?

What about aMai? From the depths of her self-imposed exile, what does Joyce Banda and her people’s party have to say for themselves about presiding over the loss of at least US$400 million? And this is only from sums over MK1 million, as I tried to explain here.

I think Malawians deserve to know.

If it is accepted that at least US$2 billion has been misappropriated the last 6 years, then both the government of Bingu Wa Mutharika and Joyce Banda’s government had access to the same IFMIS reviews and reports which contained advice on how to tackle the problems in the government financial system. Make no mistake the PwC report is not the first!

This is not about finger-pointing, but understanding where things when wrong. The question remains, why didn’t Bingu Wa Mutharika, or Joyce Banda (and their officials) plug the holes to the government financial systems when they each had the chance?

When they were informed of the loopholes on numerous occasions? When people at the National Audit Office, at the Ministry of Finance and at OPC knew what needed to be done.

Did it really have to take Mphwiyo’s blood for the issue to come to the fore? And millions of dollars spent on international accountancy firms – churning out dubious reports? When numerous official reports had been commissioned previously, pinpointing the problems, and how to fix them?

I don’t think so.

Watch this space to learn why.

Malawi Government Financial Audit: how many billions are unaccounted for?

Beware when an official document of any sort begins with a disclaimer. More often than not, something fishy is going on in the background, and someone somewhere is trying to wash their hands off it.

Last week, the leaked PwC ‘audit’ report (titled ‘Reconstruction of the Malawian Government Cashbook for purposes of further investigation’) which some people (including the Legal Affairs chair Peter Chakhwatha) claim is just an outline or at most a data analysis, revealed that MK577 billion was unaccounted for from Malawi government accounts between 1st January 2009 and 31st December 2014:-

shortfallThis news has shocked many people in Malawi, and media reports are saying theat MP’s are pressing government to publish the real report, and submit it to parliament.

But irrespective of whether the K577 billion truly reflects the total shortfall or not, or whether there is more damning news in the real report, I think it would help with putting things into perspective if we analysed the kind of figures we are dealing with here, in US$ as opposed to Malawi Kwacha (MK) only.

A direct exchange of the MK577,238,840,510.67 on Xe.com  shows the sum to be equivalent to US$1,312,092,746.42 (1.3 Billion dollars). But this is incorrect since devaluation will have altered the power of the Kwacha over the years.

I believe the question which must be asked is how much of this shortfall was unaccounted for in each year during this period?

Meaning to find a less inaccurate dollar equivalent, we need to know how much of the K577 billion went missing in each of the years between 2009 and 2014. But again this method would have limitations since the exchange rate would have varied from month to month during this period, necessitating conversions from month to month.

However, a less inaccurate figure can be obtained by converting the sums in each year with the exchange rate at the time. Thus, looking only at the total value of payments greater than or equal to MK 1 million not in Cashbook as outlined by the PwC report:-

All-Payments greater than MK1 million, on Bank Statement not on Cashbook

a more credible figure of the US$ equivalent can be ascertained by taking averages of historical exchange rates in each year, or better in each month. Using this method, then in 2009, an Oanda conversion of MK21, 313,307,081.36 (21 billion) would have given you between US$146 million and US$154 million. But the statistical number crunching used looks somewhat complex. And I’m neither an Accountant, nor an economist…

An easier conversion as of 1st January 2009, on Xe.com would have equated US$1 to MK142.7, meaning MK21, 313,307,081.36 on that date would have been equivalent to US$149, 357,442. (149 million dollars).

average-fxThus, using average exchange rates such as those on FXtop.com or on Mundi, it follows that MK21, 313,307,081.36 in 2009 was equivalent to US$151,008,268.96. This means that give or take, the Malawi government couldn’t account for at least US$ 150 million in 2009, if we consider payments greater than MK1 million only as shown in the above table!

Who knows what the real figure is if we include sums below MK1 million ??

Similarly, in 2010 US$188,244,090.18 (188 million dollars) was unaccounted for; in 2011 US$112,357,926.19 (112 million dollars) was unaccounted for; in 2012 US$53,806,121.29 (53 million dollars) was unaccounted for; in 2013 US$357, 264,295.90 (357 million dollars) was unaccounted for, and in 2014, US$35, 412,203.75 (35 million dollars) was unaccounted for.

This gives a total shortfall of US$747, 084,637.31 (747 million dollars)

But since we are currently only looking at the total value of payments greater than or equal to MK 1 million not in Cashbook (K217 billion), then, it means if we consider the whole MK577 billion alleged to have been unaccounted for, then we are looking at US$1, 981, 858, 599 (1.9 billion dollars*) which is unaccounted for, assuming a uniform spread in the data.

So the last 6 years, under various Malawian Governments, civil servants and other corrupt types have misappropriated or failed to account for at least US$2 billion.

There you have it.

* [MK577 billion x US$747million divide by MK217billion]

Wall Street isn’t happy with us

This article, a blog post by Senator Elizabeth Warren titled Wall Street isn’t happy with us is interesting and reveals the kind of greedy system the free world is up against. These people care only for profit…and sadly they have too much influence and control over the financial markets and capital that their decisions can affect things.

I’m very much inclined to replicate Senator Warren’s words on this blog:-

In 2008, the financial sector collapsed and nearly brought down our whole economy. What were the ingredients behind that crash? Recklessness on Wall Street and a willingness in Washington to play along with whatever the big banks wanted.  

Years have passed since the crisis and the bailout, but the big banks still swagger around town. And when Citigroup and the others don’t quite get their way or Washington doesn’t feel quite cozy enough, they quickly move to loud, public threats. Their latest move is a stunner. According to Reuters:

Big Wall Street banks are so upset with U.S. Democratic Senator Elizabeth Warren’s call for them to be broken up that some have discussed withholding campaign donations to Senate Democrats in symbolic protest, sources familiar with the discussions said.

Citigroup has decided to withhold donations for now to the Democratic Senatorial Campaign Committee over concerns that Senate Democrats could give Warren and lawmakers who share her views more power, sources inside the bank told Reuters.

JPMorgan representatives have met Democratic Party officials to emphasize the connection between its annual contribution and the need for a friendlier attitude toward the banks, a source familiar with JPMorgan’s donations said.

That’s right, the biggest banks on Wall Street have made it clear that they expect a return on their investment in Washington. Forget making the markets safer (where they can still make plenty of money) and forget the $700 billion taxpayer bailout that saved them and forget the need to build a strong economy for all Americans. Forget it all. The big banks want a Washington that works only for them and that puts their interests first – and they would like to get a little public fanny-kissing for their money too.

Well forget it. They can threaten or bully or say whatever they want, but we aren’t going to change our game plan. We do, however, need to respond.

According to this breaking news, our 2016 Democratic Senate candidates could lose at least $30,000 because of this decision. Can you help us raise $30,000 to match Wall Street’s money right now – and keep fighting for a Democratic Senate that will work for people instead of big banks?

Now let’s be clear: $30,000 is a drop in the bucket to JPMorgan and Citigroup. Heck, JPMorgan CEO Jamie Dimon makes more than $30,000 in just a few hours.

The big banks have thrown around money for years, spending more than a $1 million a day to hold off Dodd-Frank and the consumer agency. But they are moving out of the shadows. They have reached a new level of brazenness, demanding that Senate Democrats grovel before them.  

That kind of swagger is a warning shot. They want a showy way to tell Democrats across the country to be scared of speaking out, to be timid about standing up, and to stay away from fighting for what’s right.

Ok, they have taken their shot, but it will not work.

I’m not going to stop talking about the unprecedented grasp that Citigroup has on our government’s economic policymaking apparatus. I’m not going to stop talking about the settlement agreements that JPMorgan makes with our Justice Department that are so weak, the bank celebrates by giving their executives a raise. And I’m not going to pretend the work of financial reform is done, when the so-called “too big to fail” banks are even bigger now than they were in 2008.

The big banks have issued a threat, and it’s up to us to fight back. It’s up to us to fight back against a financial system that allows those who broke our economy to emerge from a crisis in record-setting shape while ordinary Americans continue to struggle. It’s up to us to fight back against a regulatory system that is so besieged by lobbyists – and their friends in Congress – that our regulators forget who they’re working for.

Let’s send the biggest banks on Wall Street our own message: We’re going to keep fighting, and your swagger and your threats won’t stop us. Help us match their $30,000 right now.

They represent everything that is wrong with capitalism, their behaviour is contemptible…and the words of Senator Warren proves it.

Frankly, after the 2008 credit crisis which has affected economies across the world, and hurt those at the bottom of the economic pyramid – almost everywhere, the world doesn’t need charlatans like these banks. If you can, please support Elizabeth Warren’s campaign because she is one of only a few legislators who are genuinely working for the people.

Finally, if they have the brazeness to treat the American people with so much contempt, after receiving a $700 billion bailout package from them, how do you think they (and their institutions) will treat Africans, and African governments?

A High Court reporter who travels with important court documents

bgWhen it doesn’t rain, it pours. Almost everyday, a scandal emerges in Malawi that shows the level of incompetency and dysfunction that exists on all levels. Yesterday Zodiac online posted this on their Facebook page:

A high court reporter in Lilongwe says she has been robbed of recorders and other court documents containing various cases. The court reporter, has told this Zodiak online reporter that the thieves have made away with two recorders that contain court information on Cashgate cases and also the ongoing Paul Mphwiyo attempted-murder case.The robbery is said to have occurred Tuesday mid-day at the Crossroads Complex where her vehicle was forced open.
She has since reported the matter to Lilongwe police station where authorities have told Zodiak Online they need sometime before making a public comment on the matter.

What was she doing with the court recorders at the Crossroads Complex? Should classified court documents be carried around to public venues recklessly like that? When the case at hand is so important? And why should a court reporter have access to court documents anyway? Shouldn’t such information be kept within the court, each time a day’s deliberations had finished. Hidden away in a locked safe, and protected from any partisan interference? To be accessed only when it is necessary to do so.

I’m not convinced. Something smells funny. Also, in any case why should anyone believe this story? What if it’s a heist? Planned by some people with the sole aim of derailing the court process. What is the difference between this and the files of the trial of Muluzi, which are also said to have gone missing?

As the record stands, previous governments in Malawi have not been particularly good at concluding corruption investigations, and in some cases judges have been inefficient, if not negligent when it comes to getting to the bottom of cases. In almost all of such cases, missing evidence was one of the major limiting factors terminating the trials.

The stupid woman should be fired, and the alleged backups better be real (not imagined like the CCTV evidence of State House).

Otherwise all hell will break loose…

The people who stand accused in the Cashgate Scandal are answering charges of stealing millions of dollars at the expense of Malawians. This is a serious charge. Yet look now – you want to set them free without a trial. Just like you’ve done with Bakili Muluzi, and many others in the past. Grow up Malawians. Siutchale ayi, ndi uchitsiru.

How are foreigners supposed to take us seriously with such silliness?

Another reason why Africans should own their own resources

man-40134_640Last week a well written article appeared on Al Jazeera arguing against the false and somewhat misleading picture of Corruption that is often put out by the western media. In it, it was suggested that over $900 billion a year is lost from developing to developed nations through tax evasion and illicit financial outflows. While this is a major problem for Africa, as was pointed out several years ago by Kofi Annan here, another reason which results in these outflows is that very few major industry (million dollar revenue generating) in Africa is in fact owned by Africans.

The combination of imperialist colonial legacies, poverty, a lack of capital, insufficient education, corruption, plain hypocrisy and other factors has resulted in a state of affairs whereby even capable Africans find it hard to buy into and run their continent’s biggest industries. While there are many Africans doing well in business throughout Africa, they are by far in the minority, and comparatively too few of them on the ground, than say the number of Canadians who own and control multi-million pound ventures within Canada, or say the number of Portuguese who own and control multi-million dollar companies in Portugal.

Thus, this picture inevitably creates an opportunity or gap for foreign corporations and investors to come in, and sweep away ownership of the whole lot – armed with huge amounts of capital. No surprise the profits end up everywhere else but in Africa…

In my view, far from the land grabs of Robert Mugabe (which others have tried to justify – see here and here), another reason in support of more Africans owning their continent’s industry is that doing so could mean that large amounts of money remain on the continent, to be used for education, health  -building hospitals and providing good wages for doctors, eliminating poverty, fighting corruption, policing and security, building infrustracture, improving the plight of women, investment in the youth, creating jobs, etc. It means essential capital is not being wired out to already rich countries. This in my view is a better strategy against poverty, than aid and handouts, whose monies are comparatively miniscule to the monies being siphoned from Africa.

According to the website of Britannia Mining Inc (a US company with operations in Canada and Malawi) here, the Nthale Iron Ore surface deposits which they found before 2009 are estimated from their geological survey to be at least 4.6 million tonnes in quantity. As often happens with these things, especially if we focus on the word ‘Surface’,in practice the deposits can be far larger than the estimate.

Last Friday, on the 7th of February 2014, before close of trading the price of Iron Ore on the international market was hovering around $125 per ton (see latest figures here). Whichever way this price goes (whether up or down) the next few years, 4.6 million tonnes at $125 per ton is still worth at least $575 million, a hefty sum by any measure. Even if we go with the 68% iron ore component indicated on their website, that’s still worth $391 million

Suppose Britannia Mining invested $100 million into Malawi, to cover processing the Ore, overheads including construction, logistics, wages, corporate governance activities, etc, (and it was proved that they had indeed invested such sums because sometimes businessmen overestimate the level of investment when the truth is much lower) I’d think the benefit to the Britannia would be significantly higher and disproportionately in their favour than in the favour of Malawians. Looking at previous examples of resource conflicts involving corporations in Africa, I seriously doubt that first they would invest such sums. Further, I doubt that Malawians or the Malawian government would benefit equally or at least proportionally from the resource. Which begs the question, who actually owns the resource?

As many others have opined elsewhere (see this for example), the unrestrained greed and unguarded capitalism of western businesses in Africa is causing a lot of damage and harm to Africa, and Africans. And that’s even before we get to what China is doing…

Even if the market price of Iron Ore dropped to say below $100, (say it dropped to $65, which is highly unlikely – the last time it hit $100/ ton was back in Aug 2012, and that was only for a very brief period of time), there would still be at least $300 million worth of deposits to be mined.

Don’t you think if the company that was exploiting the deposit was owned or part-owned (say 50%) by the Malawian government, or a group of Malawians, that the majority of the benefit of the resource would remain in the country, as opposed to being wired out of Malawi?

Post Paladin, and the tax outrage they caused when it was revealed that the Malawian tax authorities were missing out on tax revenues worth $200 million, how much tax have Britannia paid to the Malawian government so far, and how much have they made out of Nthale? The reason that question is crucial is because no level-headed Malawian is keen to see Malawi descend into a chaotic easy target where rich corporations (which are already wealthy and well resourced) come into the country and make billions, while the local population remains poor.

And if governments across the world do not speak against unrestrained greed, who will, seeing most governments in Africa are headed by people who have neither the will nor inclination to do so…?

Kenyatta + Branson
image from https://www.facebook.com/myuhurukenyatta

In my view, Africa needs trade partners who will help rebuild the continent, and not those looking for a quick buck, irrespective of the ethics of the means of acquiring that buck.

If you are looking to make money quick, stay away from Malawi. We don’t want get rich quick capitalists or investors. What Malawi needs are Responsible Capitalists, as opposed to a Liberal and unguarded Capitalists – a badge which brings to mind Halliburton’s Iraq heist (or even ILLOVO’s tax avoidance fiasco –  ILLOVO [which is British owned via Associated Foods Limited] is  company that last year posted a 43% rise in profits per share), an incident which it is fair to say has probably been responsible for not only much suffering, but also global unrest.

Depending on who you ask, its undeniable that corporate wrongdoing is currently happening, and the continent of Africa is being systematically ripped off. Yet there has to come a time when the tide turns, and the wrongdoing is forced to stop (sadly it’s not going to stop voluntarily). In the words of the African Development Bank president Donald Kaberuka here:

“The reality is, Africa is being ripped off big time …Africa wants to grow itself out of poverty through trade and investment – part of doing so is to ensure there is transparency and sound governance in the natural resources sector”

In my view this means rectification, and possibly includes learning lessons from those whose policies do not exacerbate the already bad situation; lessons from the likes of Brazil instead of blindly accepting unfair and discriminatory terms from organisations such as the IMF – whose policies towards the poor countries couldn’t be said to be favourable for local ownership of industry.

Maybe Malawi’s mining sector has more to learn from the likes of Vale and Debswana. Debswana is 50% owned by the Botswana government and 50% owned by De Beers. Vale is the world’s biggest producer of Iron Ore, and their profits recently doubled (Interestingly, in the same article Vale says the price of Iron Ore would hit $130 per ton, which it did, confirming the plausibility of my above little theory). They’ve seen an increase in production, which last year hit 73.4 million tonnes of Iron Ore. They are also a major tax contributor to the Brazilian government, with recent tax payments of $9.6 billion, far greater than anything any corporation have had to pay to an African government.

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Flipping the Corruption Myth

Flipping the Corruption Myth by Dr Jason Hickel, a lecturer at the London School of Economics and an adviser to /The Rules
– Corruption is by far not the main factor behind persisting poverty in the Global South.  Original article via Al Jazeera here

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Transparency International recently published their latest annual Corruption Perceptions Index (CPI), laid out in an eye-catching map of the world with the least corrupt nations coded in happy yellow and the most corrupt nations smeared in stigmatising red. The CPI defines corruption as “the misuse of public power for private benefit”, and draws its data from 12 different institutions including the World Bank, Freedom House, and the World Economic Forum.

When I first saw this map I was struck by the fact that most of the yellow areas happen to be rich Western countries, including the United States and the United Kingdom, whereas red covers almost the entirety of the global South, with countries like South Sudan, Afghanistan, and Somalia daubed especially dark.

This geographical division fits squarely with mainstream views, which see corruption as the scourge of the developing world (cue cliche images of dictators in Africa and bribery in India). But is this storyline accurate?

Many international development organisations hold that persistent poverty in the Global South is caused largely by corruption among local public officials. In 2003 these concerns led to the United Nations Convention against Corruption, which asserts that, while corruption exists in all countries, this “evil phenomenon” is “most destructive” in the global South, where it is a “key element in economic underperformance and a major obstacle to poverty alleviation and development”.

There’s only one problem with this theory: It’s just not true.

Corruption, superpower style

According to the World Bank, corruption in the form of bribery and theft by government officials, the main target of the UN Convention, costs developing countries between $20bn and $40bn each year. That’s a lot of money. But it’s an extremely small proportion – only about 3 percent – of the total illicit flows that leak out of public coffers. Tax avoidance, on the other hand, accounts for more than $900bn each year, money that multinational corporations steal from developing countries through practices such as trade mispricing.

This enormous outflow of wealth is facilitated by a shadowy financial system that includes tax havens, paper companies, anonymous accounts, and fake foundations, with the City of London at the very heart of it. Over 30 percent of global foreign direct investment is booked through tax havens, which now collectively hide one-sixth of the world’s total private wealth.

This is a massive – indeed, fundamental – cause of poverty in the developing world, yet it does not register in the mainstream definition of corruption, absent from the UN Convention, and rarely, if ever, appears on the agenda of international development organisations.

With the City of London at the centre of the global tax haven web, how does the UK end up with a clean CPI?

The question is all the more baffling given that the city is immune from many of the nation’s democratic laws and free of all parliamentary oversight. As a result of this special status, London has maintained a number of quaint plutocratic traditions. Take its electoral process, for instance: More than 70 percent of the votes cast during council elections are cast not by residents, but by corporations – mostly banks and financial firms. And the bigger the corporation, the more votes they get, with the largest firms getting 79 votes each. This takes US-style corporate personhood to another level.

To be fair, this kind of corruption is not entirely out-of-place in a country where a feudalistic royal family owns 120,000 hectares of the nation’s land and sucks up around £40m ($65.7m) of public funds each year. Then there’s the parliament, where the House of Lords is filled not by-election but by appointment, with 92 seats inherited by aristocratic families, 26 set aside for the leaders of the country’s largest religious sect, and dozens of others divvied up for sale to multi-millionaires.

Corruption in US is only slightly less blatant. Whereas congressional seats are not yet available for outright purchase, the Citizens United vs FEC ruling allows corporations to spend unlimited amounts of money on political campaigns to ensure that their preferred candidates get elected, a practice justified under the Orwellian banner of “free speech”.

The poverty factor

The UN Convention is correct to say that poverty in developing countries is caused by corruption. But the corruption we ought to be most concerned about has its root in the countries that are coloured yellow on the CPI map, not red.

The tax haven system is not the only culprit. We know that the global financial crisis of 2008 was precipitated by systemic corruption among public officials in the US who were intimately tied to the interests of Wall Street firms. In addition to shifting trillions of dollars from public coffers into private pockets through bailouts, the crisis wiped out a huge chunk of the global economy and had a devastating effect on developing countries when demand for exports dried up, causing massive waves of unemployment.

A similar story can be told about the Libor scandal in the UK, when major London banks colluded to rig interest rates so as to suck around $100bn of free money from people even well beyond Britain’s shores. How could either of these scandals be defined as anything but the misuse of public power for private benefit? The global reach of this kind of corruption makes petty bribery and theft in the developing world seem parochial by comparison.

But this is just the tip of the iceberg. If we really want to understand how corruption drives poverty in developing countries, we need to start by looking at the institutions that control the global economy, such as the IMF, the World Bank and the World Trade Organisation.

During the 1980s and 1990s, the policies that these institutions foisted on the Global South, following the Washington Consensus, caused per capita income growth rates to collapse by almost 50 percent. Economist Robert Pollin has estimated that during this period developing countries lost around $480bn per year in potential GDP. It would be difficult to overstate the human devastation that these numbers represent. Yet Western corporations have benefitted tremendously from this process, gaining access to new markets, cheaper labour and raw materials, and fresh avenues for capital flight.

These international institutions masquerade as mechanisms for public governance, but they are deeply anti-democratic; this is why they can get away with imposing policies that so directly violate public interest. Voting power in the IMF and World Bank is apportioned so that developing countries – the vast majority of the world’s population – together hold less than 50 percent of the vote, while the US Treasury wields de facto veto power. The leaders of these institutions are not elected, but appointed by the US and Europe, with not a few military bosses and Wall Street executives among them.

Joseph Stiglitz, former chief economist of the World Bank, has publicly denounced these institutions as among the least transparent he has ever encountered. They also suffer from a shocking lack of accountability, as they enjoy special “sovereign immunity” status that protects them against public lawsuit when their policies fail, regardless of how much harm they cause.

Shifting the blame

If these patterns of governance were true of any given nation in the global South, the West would cry corruption. Yet such corruption is normalised in the command centres of the global economy, perpetuating poverty in the developing world while Transparency International directs our attention elsewhere.

Even if we do decide to focus on localised corruption in developing countries, we have to accept that it does not exist in a geopolitical vacuum. Many of history’s most famous dictators – like Augusto Pinochet, Mobutu Sese Seko, and Hosni Mubarak – were supported by a steady flow of Western aid. Today, not a few of the world’s most corrupt regimes have been installed or bolstered by the US, among them Afghanistan, South Sudan, and the warlords of Somalia – three of the darkest states on the CPI map.

This raises an interesting question: Which is more corrupt, the petty dictatorship or the superpower that installs it? Unfortunately, the UN Convention conveniently ignores these dynamics, and the CPI map leads us to believe, incorrectly, that each country’s corruption is neatly bounded by national borders.

Corruption is a major driver of poverty, to be sure. But if we are to be serious about tackling this problem, the CPI map will not be much help. The biggest cause of poverty in developing countries is not localised bribery and theft, but the corruption that is endemic to the global governance system, the tax haven network, and the banking sectors of New York and London. It’s time to flip the corruption myth on its head and start demanding transparency where it counts.

Dr Jason Hickel lectures at the London School of Economics and serves as an adviser to /The Rules. 

Follow him on Twitter: @jasonhickel

UnlockedMoneySafe: Investigating Cashgate – the twists and turns of corruption in Malawi

I feel sorry for the forensic investigators probing into Cashgate. Each day brings with it a new revelation, scheme or scandal, each day new drama. If it wasn’t the fact that government funds belonging to a country which is regarded as a poor country have been misused, I’d say stop wasting resources on an investigation which you will never fully get to the bottom of. If it wasn’t the fact that it is innocent citizens of a beautiful country who stand to lose out, I’d say give up.

Today another report emerges that the secretary of the Catholic Commission for Justice and Peace in Lilongwe, Peter Chinoko (Peter Chinoko is the brave soul who has been attacked and even sustained a fracture in the past for helping organise the July 20 protests against Bingu Wa Mutharika. The same regime that was oppressive against Joyce Banda. When he speaks we must listen) has said that the current president of Malawi, Joyce Banda is implicated in the cashgate scandal.

According to the news report, this is because she organised an inner circle designed to channel funds, following her complaints that she was spending too much of her own money on the PP party. Interestingly, the name of a company I have heard before associated with Joyce Banda (which has been mentioned by several people following the scandal much closely) has popped up yet again:  Veventis Risk Solutions, headquartered in Mayfair, London.

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It’s been suggested before by various people and organisations that there have been attempts to obstruct the investigation into the cashgate crisis in Malawi, including employment of delay tactics, let alone a PR sanitizing machine.

But what concerns me is that with so much speculation on social media, it’s becoming harder to distinguish between credible news and misinformation, more so since the PR machine which is attempting to distort the news, keeps on providing what I consider to be false information. For example, Nyasa times, one of the most popular online Malawian news sources is yet to carry the above allegation??

So, if one reads something online, on social media, as we saw with the revelations of Mphwiyo shooting, there is every chance that the tenets of truth are contained within a pile of speculation, or vice versa, with some embellishments for full effect. Personally, such information, although probably not strictly journalistic, could provide leads to the forensic investigators, on who to interview next.

Anyhow, if you are not familiar with the latest news headlines, see below:

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The troubles facing Joyce Banda are many. Recently, a journalist questioned the statements made by the Malawian President regarding what she reported the IMF to have said about her government’s leadership.

Yet all along, the president has maintained that she is innocent and not a part of the officials who have been embezzling money from the government. In a recent statement to Al jazeera when asked if she has failed with regard to fighting corruption, she said:

“No, we have not failed. I don’t know if you know that this cancer has been going on for 15 years and the biggest tragedy in the fight against corruption is covering up. I think the best one can do as a leader is that once you discover then you need to take advantage of the opportunity.”

Which is interesting because not too long ago an article emerged on Afrol News website (titled Malawi loses US$ 40 million in corruption ) in which Joyce Banda’s own company was alleged to have been paid for work it did not undertake. In particular the article says:

The document alleges that the government has not yet recovered kwacha 13 million in a case where DPP Secretary-General Joyce Banda is said to have been awarded a kwacha 26 million contract to construct a transit depot by ADMARC, the national food security agency, in 2002 when she was a Board Member. The document further reveals that Ms Banda allegedly pocketed kwacha 13 million in advances before commencement of the work.

Unless the document is a fraud, doesn’t this compromise her position even further?

Only time will tell where this goes next, but I appeal to donors and the forensic investigators not to leave any stone unturned. All these organisations whose names have been popping up all over the place should be questioned. There is a shameless and cancerous culture of impunity in Malawian politics that should be ended. Malawi’s money is definitely not safe with the current breed of leadership.

From the politics of chameleons, neatly chronicled by another activist here, to jealousies and a pull-down culture, there is a lot that needs fixing in Malawi. The question is, are Malawians up for the challenge?

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