As China Corrupts Africa, African Leaders Follow Suit

The West, especially the United States, has long attempted to infuse the African continent with the rule-of-law concept and practice. This is not only the business of investment protection and property rights, but also geopolitics, as the competition with China is heating up.

The results have been more than disappointing; corruption still is pervasive. Tin pot dictators absconding with the crown jewels of the republic in private jets to the Cayman Islands is a scenario that is all too common.

Recently the task of bringing the African continent into the 21st century has become all the more difficult. Much of this backsliding can be traced to Chinese influence, the most corrupt regime of all — just more polished and powerful than the African strongmen.

The Chinese economic trade-craft is to enter the jurisdiction with lots of promises of prosperity, infrastructure build outs and bags of cash to those that need to be greased with a little encouragement to follow the new game plan.

At the end of the day, however, African governments are left with armies of Chinese workers and the loss of strategic resources to a much stronger power.

Across Africa, from Ethiopia to Tanzania, Chinese investment and money are changing the continent. Unfortunately, this may not bring long-term prosperity to these countries. Former U.S. Secretary of State Rex Tillerson eloquently stated such when he accused China of using “predatory loan practices,” undermining growth and creating “few if any jobs” on the continent. In Ethiopia, Tillerson charged the Chinese with providing “opaque” project loans that boost debt without providing significant training, reported The Washington Post.

Perhaps the most striking example of regression when it comes to the implementation of the rule-of-law in Africa is in Botswana, once the darling of the West in terms of its progress against graft and corruption. However, that reputation is quickly slipping away. Beneath an all but idyllic surface there are deep systemic problems with Botswana’s government opacity and questionable governance dragging down its growth and undermining its prospects.

A prime illustration is the current drama playing out with Nornickel, a large metals producer, which sold its interest in the Tati facilities and was to sell the Nkomati facilities in-country to BCL, a Botswanan state-owned conglomerate, which promptly put the company in receivership and refused to pay a dime for any part of the deal. In 2016, Nornickel applied to the Botswanan court for permission to defend its rights in London, where Nornickel and BCL had contractually agreed disputes should be heard, and only on June 21, 2018, after an unreasonably long delay, the Botswanan court denied Nornickel’s request.

Nornickel sees the court’s ruling as an attempt to deny the company the ability to resolve this dispute through impartial, international arbitration, and maintains that it will not abandon its legal action, including its claim against the Botswanan Government. The company says it will use every avenue available to recover the debt which amounts to around $300 million.

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The case bears all the hallmarks of a government-coordinated plan: obtaining permission to arbitrate in an agreed jurisdiction (London in the case of Nornickel/BCL dispute) would normally take a couple of months to consider in courts. Yet it took almost two years, and it looks as if the judges in Botswana were waiting for the BCL companies in question to enter the final stage of liquidation.

It is hardly surprising. Judges in Botswana are appointed by the country’s president without any parliamentary oversight or elections and thus hardly independent. It is worth mentioning that one of the judges of the High Court, Justice Dr. Zein Kebonang is the twin brother of Sadique Kebonang, Minister of Mineral Resources, Green Technology and Energy Security in Botswana’s government, the authority that ordered the liquidation of BCL. As the Church Lady of SNL fame would say, “How convenient!”

A recent study by Deloitte & Touche declared that even in the advanced fiber optic business, as much as 5 percent of gross revenue is stolen. One can only image what is going on in the natural-resource sector. The ruling class has plenty of ways to hide corrupt revenues and still enjoy a lavish lifestyle, complete with private jets on call.

The Panama Papers scandal revealed that more than 100 Botswanan individuals and companies are listed as shareholders of entities registered in offshore tax havens. One can imagine how many more are yet uncovered.

These developments are significant, as the ruling Democratic Party is in turmoil in the run-up to the 2019 elections. The corruption and the political crisis have revealed a significant gap between Botswana’s reputation and reality. Perhaps one-party rule has worn out its welcome in the country.
In any event, due to the Nornickel scandal among others, foreign investors are leaving in droves. In 2010, BP decided to exit the country. Last year, Anglo American got rid of its coal assets in Botswana. The treatment of Nornickel could be the final straw to break the country’s reputation.

But does it matter for China? Botswana’s president, Mokgweetsi Masisi, is going to visit China in September and is expected to sign a bunch of new deals. It’s “love in the air,” as they put it in Botswana.

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With the Chinese government now threatening to make Apple “share the wealth” with Chinese citizens, for the profits generated in the Middle Kingdom, it is not surprising that governments in Africa would seize upon Beijing’s tactics to defraud and steal from foreign investors. This type of behavior leads to value destruction, international conflicts and less prosperity for all, especially the Botswanan people. It would be a shame if Botswana is allowed to get away with the alleged theft of mining facilities worth hundreds of millions of dollars.

But as the Botswanan corrupt government officials see it, if China can do it, why not us?

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