Street vendors in Africa reflect the income inequality that pervades the continent, much of it due to corruption. Credit: Jeffrey Moyo/IPS

By Jeffrey Moyo
HARARE, Feb 21 2015 (IPS)

Reports this year of illicit moneys from African countries stashed in a Swiss bank – indicating that corruption lies behind much of the income inequality that affects the continent – have grabbed international news headlines.

Secret bank accounts in the HSBC’s Swiss private banking arm unearthed this year by the International Consortium of Investigative Journalists (ICIJ) were said to hold over 100 billion dollars, some of which came from Africa, including some of the poorest nations on the continent.

When these funds leave the region, they deny the very nations that need them most.

For example, at least 57 clients of the Swiss HSBC bank associated with Uganda were reported to be worth at least 159 million dollars. The World Bank has estimated that Uganda loses more than 174.5 million dollars in corruption annually.“Income inequality begins with our political leaders and corrupt wealthy business people who, more often than not, illicitly own the resources of the [African] continent” – Claris Madhuku, Platform for Youth Development, Zimbabwe

It is not a crime for Africans to have a Swiss bank account. But questions are now being raised by local tax offices as to whether the proper taxes were paid on the stashed amounts.

In South Africa, the head of the Revenue Service, Vlok Symington, said his office was analysing the information. “Early indications are that some of these account holders may have utilised their HSBC accounts to evade local and/or international tax obligations,” Symington was reported as saying by the South Africa Sunday Times.

“Income inequality begins with our political leaders and corrupt wealthy business people who, more often than not, illicitly own the resources of the continent,” Claris Madhuku, director of the Platform for Youth Development, a democracy lobby group in Zimbabwe, told IPS.

Diamonds, for example, which have made many traders wealthy, are often mined by the poorest of the poor, treated almost as slaves in war-torn African countries, despite the Kimberley Process Certification Scheme, which was established in 2003 to prevent the flow of these diamonds.

“It’s a case of greed and corruption,” thundered Zimbabwean independent political analyst, Ernst Mudzengi. “Africa has parasitic politicians who are primarily concerned with self-centred political power and economic gain as ordinary Africans remain at the periphery in poverty,” Mudzengi told IPS.

Development experts here attribute income inequalities to the continent’s lax anti-corruptions laws.

“African countries do not have sound anti-corruption laws and politicians and the rich amass too much power exceeding even the powers of the police here, leaving them with the liberty to accumulate wealth overnight by whatever means without being questioned,” Nadege Kabuga, an independent development expert in Kigali, Rwanda’s capital, told IPS

“It’s shocking how huge banks such as HSBC have created a system for enormously profiteering at the expense of impoverished ordinary people, worse by assisting numerous millionaires from Africa in particular to evade tax payment, disadvantaging the already poor,” Zenzele Manzini, an independent economist based in Mbabane, the capital of Swaziland, told IPS .

“Very often, government directors, ministers and their secretaries are the ones globetrotting on government businesses, awarding themselves huge allowances and the lower government workers remain stuck at the periphery with no extra benefits besides the meagre salaries they get monthly,” a top Zimbabwean government official in the Ministry of Labour, told IPS on the condition of anonymity, afraid of victimisation.

Writing for Financial Transparency Coalition, a global alliance of civil society organisations and governments working to address inequalities in the financial system, Koen Roovers, the coalition’s European Union (EU) Lead Advocate, asked the deeper question: “How do we prevent this in the first place?”

To catch fraud sooner rather than later, capacity in developing countries must be increased, Roovers said. “The scale of the challenge is significant: the UK-based charity Christian Aid has estimated that sub-Saharan Africa would need around 650,000 more tax officials to reach the world average.”

Rich states have promised help to poor countries to build the capacity they need, but these commitments have yet to be honoured.

Researchers at the U.S.-based Global Financial Integrity, a non-profit organisation working to curtail illicit financial flows, said developing nations have lost almost one trillion dollars through illicit channels.

Without clearly defined measures to curb income inequalities, economists say the African continent may be headed for the worst levels of poverty set to hit even harder at the already poor.

“Africa may keep facing perpetual poverty amid rising income inequalities because governments here have no institutions and expertise to identify and halt money laundering by corrupt wealthy individuals and politicians evading tax,” Zimbabwean independent economist, Kingston Nyakurukwa, told IPS.

According to Roovers, “criminals and their enablers are creative, so the only way to prevent future scandals is to shed light on what criminals and tax dodgers are trying to hide. This is why online registers of assets for all legal persons and arrangements are necessary and should be publicly available.

“If we turn a blind eye to these loopholes,” he added, “economic development for all will continue to be undermined by illicit actors looking to exploit them.”

Edited by Lisa Vives/Phil Harris    

Belarusians will vote for a new, but still regime-controlled parliament on Sep. 23. At least those who do not respond to calls for boycotting the poll.

The opposition is far from united in their positions on the election: some are campaigning, some boycotting, others plan to pull out right before voting day. But all are agreed that the election process is being rigged.

The seats, dissidents believe, will again be distributed according to the will of president Alexander Lukashenko who has ruled the nation of 10 million since 1994, earning the title “Europe’s last dictator”. The parliament in Belarus, as in most autocracies, has in any case very little say.

The election campaign started Aug. 22. The registration process ended the same day. Every fourth contender has been denied the right to run.

The election commissions registered most opposition candidates, but banned the most popular – on the ground of alleged irregularities in their financial disclosure, or claims that some of the signatures on their supporters’ lists were forged.

“Registration has been denied to those who would run till the end with a fair chance to win,” analyst Valery Karbalevich tells IPS.

Among the excluded are Aleksander Milinkevich, leader of For Freedom movement, a former Lukashenko rival in the presidential race, Anatol Liaukovich, former leader of the Belarusian Social-Democratic Party and Mikhail Pashkevich from ‘Tell the Truth!’.

Some popular dissidents are still in jail, like Mikola Statkievich who was sentenced for six years for “driving riots” on Dec. 19 2010 – the day of the rigged presidential election. An estimated 20,000 protesters assembled in the main square of capital Minsk on that day, leading to a massive crackdown against opponents of the regime.

Some opposition members cannot run because of their suspended sentences. Others fled abroad, such as Ales Mikhalevich, another presidential candidate, who was arrested and charged for organising riots.

Mikhalevich was released after two months in jail and said he and other political prisoners had been tortured. He escaped the country soon after, and has been granted political asylum in the Czech Republic.

This has not deterred him from trying to run for parliament. Members of the civic initiative ‘Freedom for Mikalai Statkevich and other political prisoners’ put forward candidatures of Statkievich and Mikhalevich. But the concerned election commission derided the move as “PR action aimed at gaining them prominence,” and said “there is no legal ground” to nominate them.

IPS asked Ales Mikhalevich whether he believes the opposition will manage to enter parliament at all. “Probably not,” he said. “The mechanism of vote rigging is well oiled. To quote Joseph Stalin: ‘It’s not the people who vote that count; it’s the people who count the votes’.”

Among 68,945 members of the election commissions charged with vote counting less than 0.1 percent are from the opposition, fewer than in the last parliamentary election in 2008. The 279 registered candidates then included 70 critics of the regime – none of who gained a seat.

But Mikhalevich says boycotting would be a mistake. “The Opposition should run to show that our candidates are of better quality than those of the regime.” The Lukashenko administration has put forward mostly elderly officials and security apparatus members.

Independent opinion polls give the president 25-35 percent of support, mostly among villagers and pensioners. But that does not mean that the rest are ready to support opposition, let alone fight the regime.

Interest in the election is close to zero. “None of my friends plan to go to the ballot,” Alexei, a 26-year-old doctoral student from Minsk told IPS. “Not because we are boycotting; we just don’t care about politics. This election is not going to bring any change.”

Divisions in the opposition movement are playing further into the hands of the regime.

“By persecuting some opponents while offering preferential treatment to others, Lukashenko is skillfully playing his critics,” said Mikhalevich.

Although confident of victory, Lukashenko still seems to be nervous, mostly over the prospect of widespread boycott.

In a speech Sep. 1 he criticised those who shun electoral confrontation. “Had it been the actual opposition, they would have struggled to the very end for power, for the nation’s interests,” he said. “But this is the fifth column, they act for the benefit of certain powers, some of which are located outside our country.”

Another sign of the regime’s nervousness are recent arrests of administrators of political social media groups – especially those calling for boycott.

On Aug. 30 law enforcement officers in Minsk and Vitsebsk detained four moderators of two pro-opposition groups. One of them had said bluntly, “We’ve had enough of Lukashenko” – on the Russian social network VKontakte.ru.

Investigators physically abused the moderators in a bid to obtain the password of the group they administer. “I was taken to the living room and tortured for an hour for the password. They hit me in the head, chest and stomach,” Pavel Yeutsikhiyeu reported.

Among them, Yeutsikhiyeu and Andrey Tkachou got five and seven days in jail, respectively, on charges of petty hooliganism. Others were released after a few hours.

The human rights group Viasna reported on Aug. 31 that access to the pro-opposition news websites Charter97 and BelPartizan had been blocked. Much of the content was removed.

“As usual, the regime is preparing for the elections with an all-out crackdown,” Reporters Without Borders declared. “The judicial harassment of journalists and Internet users critical of the government has just one aim – to keep them under pressure and make them feel permanently threatened.”

The authorities are meanwhile engaged in building pro-government websites, some defaming opposition members. None has gained much popularity.

Many people believe Lukashenko will stay in power for the next two decades, then hand the government to his son Kola, now eight years old.

Mikhalevich predicts “a revolt inside the state apparatus which might open the doors of change.

“To me a Ceasusescu scenario seems probable,” he said, referring to Romanian head of state Nicolae Ceausescu who was overthrown and executed following a televised two-hour court session in 1989.

“I believe Belarusians have already grown to democracy,” he said. “They just don’t want to fight for it.”

This week, for the first time, the World Bank began publishing decisions by the institution’s sanctions board on cases involving fraud or corruption.

The move was heralded by several watchdog and advocacy groups as a victory for transparency.

“This is a great move by the World Bank,” Eric LeCompte, the executive director of Jubilee USA Network, a group that works on issues of international debt, said on Friday. “Everyone wins with this decision.”

While other international financial institutions have a sanctions process for entities found guilty of engaging in corrupt practices, the World Bank’s new publications process is the most comprehensive.

Although only eight decisions were made public this week, cases will now be freely accessible on a new website.

“NGOs, businesses and governments can now better monitor patterns of fraud and corruption,” LeCompte said in a statement. “Most importantly, the poor will benefit as this reporting further helps curb this behavior and ensures that resources are not stolen from the developing world.”

The World Bank’s sanctions board is the last court of appeal for contested cases involving corruption.

“The World Bank Group takes a hard line against corruption, and we believe that greater transparency must be part of that effort,” the Bank’s managing director, Sri Mulyani Indrawati, said while announcing the new plans.

“This move should deepen the deterrent effect of debarments and enhance the educational value of the Sanctions Board’s findings.”

Over the past decade, the Bank has named corruption as “one of the greatest obstacles to economic and social development”.

“Fraud and corruption, if unchecked, can erode confidence among donors and beneficiaries, leading to skepticism about the effectiveness of international development,” the Bank has stated.

The sanctions process was set up in 1999 as a way to increase accountability for firms found to have engaged in a spectrum of corrupt activities, particularly collusion, in connection with Bank-funded projects.

The board, made up of Bank officials and external legal experts, constitutes the second level of a two-tiered system set up to deal with allegations of corruption.

Since its establishment, the board has sanctioned more than 530 companies and individuals, including from the U.S. and several European countries.

Most of these actions have taken the form of debarments, the most serious of five actions the board can take, in which the parties found guilty are no longer eligible for participation in World Bank-funded projects.

Yet for a system created on the assumption that public shaming of this sort would constitute a significant deterrent to corruption, until now the Bank has only ever published the names of those companies that were being sanctioned – “a frustrating situation for many external observers hoping to track cases and patterns of fraud and corruption”, according to Global Financial Integrity, a Washington-based watchdog group.

This process was made somewhat more robust in December 2011, when the Bank began to publish a legal journal, which offers explanation of the various legal precedents used in the sanctions board’s decision-making processes.

The new publication schedule will now allow for full analysis of decisions by the sanctions board, as well as the evidence and legal logic used to arrive at those decisions. Many observers are suggesting that the new trove of information will be valuable for governments, NGOs, other businesses and any other entities interested in issues of corruption.

At a panel discussion here in Washington this week, the World Bank also announced two new members to the sanctions board. Catherine O’Regan is a former judge on the South African Constitutional Court and president of the International Monetary Fund Administrative Tribunal; and Yves Fortier is a former Canadian ambassador to the United Nations, who will now serve as the board’s chair.

The first eight sanctions cases published involved include debarment decisions for TEAM, a U.S. consultancy; De Lorenzo of America, an Italian energy and training firm; Income Electrix, an African power utility; M/S Concept, an Indian pharmaceuticals manufacturer; Zhonghao, a Chinese construction company; ASDECON, a Thai consultancy; and Contransimex, a Nigerian engineering firm.

Most of the related decisions apply only for a limited period of time – typically a year or two – and allow for the possibility of these companies regaining their good graces under the World Bank in the future.

“We heartily welcome this move by the World Bank,” Heather Lowe, director of government affairs at Global Financial Integrity, said following this week’s announcement.

“Knowing which companies have been debarred is helpful, but understanding why a company has been debarred is critical in the fight against fraud and corruption. The methods used by companies and individuals, who are defrauding the World Bank, are methods used to defraud governments, businesses, and individuals globally.”