Africa is the Net Creditor? This should not surprise us…

June 15, 2013 11:28 am3 comments by:

raw_materials_0Last month the African Development Bank and Global Financial Integrity reported that Africa is the net creditor in that there are enormous capital flights from Africa.  The report showed that net resource transfer out of Africa range from US $ 597 billion to US $ 1.4 trillion from 1980 to 2009.  Furthermore, it found out that illicit money transfer from Africa ranged from US $ 1.22 to 1.35 trillion from 1980 to 2009. This is indeed sad and something that should be taken very serious by African leaders and all of us.

However, this is not a surprise finding. History teaches us that Africa has always been the net creditor through different ways depending on the international economic system.  During slavery mode of production, Africa was the main source of slaves who were taken to sustain the agricultural boom in South and North America and European Industrial revolution. The famous history lessons in secondary schools with the title ‘Triangular Trade’ taught us that slaves were taken from Africa to work in the plantations in America, then the products from plantations were exported to Europe as raw materials to be processed, the manufactured goods from Europe were then exported to Africa and sold at very high prices in exchange to slaves and other precious resources such as minerals.

When Slavery was abolished, Africa became the main source of raw materials. The imperialists conquered and settled in Africa.  Again in secondary school we were taught of the ‘Scramble of Africa” in which leaders of the imperial states met in Berlin between 1884 and 1885. The Berlin Conference brought together these imperial states with one main agenda to divide Africa so as they can extract resources smoothly.  Gold, which majority of it came from Africa, became the standard reserve asset in those countries’ central banks. Africa became a source of raw materials and market for manufactured goods. King Leopold of Belgian, for example, called his colony Congo, a magnificent cake, as he enriched his personal wealth and Belgium with resources from Congo.

Just like slavery, colonialism became old fashioned, illegal and a shame. Nevertheless, the business of extracting Africa’s resources was far from over.  So another means to get Africa’s resources had to be discovered. This was what post-colonial scholars have termed ‘neocolonialism’ meaning that Africa’s independence was only ‘flag independence’ and not economic independence. Neocolonialism was facilitated and enhanced by African leaders who found themselves donor dependant. Thus, they could not make independent political economic decisions.  Since national interests are integral to nation-states’ foreign policies, the donors took advantage and imposed policies that benefitted their nations at the expense of Africa.  Africa’s wealth continued to benefit the Western countries.  For a thorough analysis of how slavery, colonialism, and neo-colonialism exploited Africa’s resources read Walter Rodney’s book ‘How Europe Underdeveloped Africa?” Rodney’s book is a masterpiece with empirical evidence as to how Africa was exploited by the European powers. Rodney’s account can also be read from another angle as to how Africa’s developed the West. Ali Mazrui argued that ‘we should investigate Africa’s positive impact upon Europe production to space communication’.  There are many other scholars and books that account the exploitation of Africa resources (human and natural) and how they benefitted the West. Such include Hochschild’s King Leopold’s Ghost, which accounts for the wealth extracted from Congo to build Belgium.

At this point it’s important to mention the trends in the international economic systems, which determined the means to exploit Africa’s resources. These trends are encompassed within globalization processes. Although globalization as a concept became more popular in the late 1980s and early 1990s, globalization has been a centuries long phenomenon. Ali Mazrui speaks of phases of globalization going back to slavery. These different phases of globalization processes integrated Africa into global economy that only benefitted the powerful American and European civilizations and a few selfish Africans.

If we look at these trends from post World War II period, we can understand how capital flight and illicit money transfer from Africa facilitated by tax havens in Western countries are modern means to extract Africa’s resources.  In the immediate post WWII, Bretton Woods system was established which among other things gave way to public control of the monetary and financial order. Geoffrey Underhill and Xiaoke Zhang have a good account of the Bretton Woods economic system and the changing nature of international financial system in the post WWII period. Within the Bretton Woods system there was what John Ruggie called embedded liberalism, in which states’ were given control of public control of finances for welfare and employment creation activities in the midst of free trade. Thus, free trade was being promoted along with the conflicting phenomenon of allowing government’s economic intervention. The system of embedded liberalism enhanced neocolonialism as African leaders in position made economic policy decisions that were influenced by the donor countries. This was further complicated and enhanced by the politics of Cold War. After few years embedded liberalism did not work out very well for capitalism and so a change was needed. From then on we see the rise of neoliberalism. Unapologetically neoliberalism promotes free financial markets mostly under the control of private sectors and markets. It is neoliberalism that can help us to understand the imposition of Structural Adjustment Policies (SAPs) in Africa, which even Joseph Stiglitz, one time chief economists of the World Bank, acknowledged that they were a detriment to Africa’s economic progress.

Neoliberalism enhances free global financial transactions and market. Financial markets and capital flights are facilitated through the integration of financial markets and financial institutions.  Like slavery, colonialism, and neo-colonialism, neoliberalism further exploits Africa’s resources through tax havens, which encourage illicit money transfers from Africa. The money goes and stays in banks owned by Western countries. Those savings are used for investments and loans to multinational corporations, which further exploit Africa’s resources through tax evasion.

There are many other ways through which Africa’s resources are transferred to the Western countries. Higher education fees are one example. Education fees from African students studying in the West are huge. If only these fees stayed in Africa and fund research in higher education! As if the international fees are not enough, some of the best African brains remain in the Western countries out of ‘good’ job offers and affluent living conditions.  Even worse some remain out of ‘mind-colonization’ of not wanting to come back ‘home’ for the lure of ‘good’ life even if they have to compromise their education with menial jobs. This is called brain drain.

Thus when we hear of Africa as a net creditor, we should not be surprised. This has been centuries long reality. We, Africans, need to sit back and think through these matters seriously. We need to securitize these issues. Just like slavery became a crime and how colonialism was securitized and fought against, we need to securitize the problem of money transfer. Raising awareness is not enough. It’s great that this year G8 meeting’s agenda include tax evasion and illicit money transfer, but Africans need to press harder and ensure that the hegemonic nations don’t design another smart way of extracting African resources. We need to remember the state-centric nature of international politics, whereby national interests come first. Thus, the G8 leaders will be very careful not to hurt their national interests and thus we should not wait for solutions from them.

In concluding, it is important to note that the Western countries have always been successful in attracting resources from Africa because of the collaboration they receive from a few Africans leaders in positions. Even during Slavery, some chiefs collaborated with slave buyers in exchange for basic gifts such as guns or clothes. Unfortunately, that has not changed. Out of selfish motives, some corrupt African leaders have been selling their countries’ resources for personal gains. We cannot keep blaming the West. We need to sit down and reflect. Often Western leaders or negotiators have their national interests first, while African leaders are known for having their personal interests first. Let’s change!

 

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3 Comments

  • Its definitely time to change. Very well written Aikande.

    • Andrew Mbega

      Many congratulations to you Dr Aikande for your good work, for sometime now i have been reading your articles on various issues concerning our country Tanzania, for really our country needs women like you

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