New Internationalist

backs And Kleptocracy

Issue 259

new internationalist
issue 259 - September 1994

Kick-backs and kleptocracy
The super-rich are not confined to the North. They infest the South as well. In nearly 30 years of dictatorship Mobutu Sese Seko has reduced Zaire to a state of almost complete chaos – and accumulated an immense personal fortune in the process. Steve Askin and Carole Collins show how foreign governments and big business oiled the works.

Mobutu Sese Seko, Zairian dictator, has spent three decades carefully refining his system for transforming the public resources of Zaire into private wealth, while using bribery, coercion and violence to thwart all movements for change. Anti-Mobutu appeals lead only to frustration, probably because the Zairian leader serves – in the well-chosen words of former US Secretary of State Cyrus Vance – as a ‘consistent if sometimes embarrassing source of support’ for Western strategic objectives. Zairian fighters for democracy are ruthlessly undercut by the West’s continued backing of Mobutu.

The consequences of his system, commonly known as ‘kleptocracy’ or government by theft, are well known: the immiseration of the people; the destruction of the nation’s infrastructure; the enrichment of Mobutu and his cronies; and the transformation of Zaire into the prime staging-ground for foreign intervention against other African nations. The methods are equally clear: diverting military aid, bribing foreign governments and officials, seizing foreign and local assets to augment his own personal wealth, smuggling diamonds... the list is endless, the means: pure theft.

 

Leopold and the loot
The roots of modern kleptocratic practice in Zaire can be traced directly to the Congo Free State, created by King Leopold II of the Belgians as his personal property in the 19th century. Leopold was the first ruler to use profits from this land’s vast natural resources to build a personal fortune at the expense of the people.

The secrets of Leopold’s system were first unraveled by shipping clerk turned muckraking journalist Edmund Morel. Millions of Congolese were murdered or died from disease and overwork under the forced-labor regime which Leopold used to extract rubber, ivory and other precious commodities.

Leopold, anticipating Mobutu by a century, used an intricate system of double bookkeeping and false trade statistics to conceal the profits from his vast private domain.

As Mobutu was to do decades later, Leopold poured his African earnings into foreign investments and real estate, including a French Riviera estate at Cap Ferrat, just ten miles from one of Mobutu’s favorite estates.

The King spent $6 million upgrading his palace at Laeken; at least $3.5 million on other Belgian real estate; millions more for Belgian and French properties purchased secretly through his doctor or his architects; and uncounted additional sums for a dazzling array of investments in Asia, Latin America and the Near East.

He made the Congo one of the world’s first ‘off shore’ money-laundering centers. He used Congo-incorporated companies to quietly pursue business opportunities around the world: railway construction deals in China; fishing rights off Morocco; mines in Greece and the Philippines; and rubber concessions in Bolivia. Economic historians appropriately called Leopold’s Congo economic system a raubwirtschaft, or ‘robbery economy’.

The violence Leopold used to extract his wealth provoked one of the first international human-rights crusades, finally persuading the Belgian Parliament to take the colony out of Leopold’s control in 1908. Violence eased.

But the Belgians then systematized the use of forced labor, and enforced cash cropping and coercive taxation to transform the Congolese peasantry into a wage-labor force for Belgian-owned mining and agriculture firms.

By 1950-59, the decade preceding independence, Belgian investments in the Congo enjoyed profits two to three times the domestic Belgian average. The legacy of Leopold was to leave its mark for a long time to come.

Steve Askin and Carole Collins

General Mobutu seized power in 1965. His first speeches eloquently decried mismanagement by government functionaries who served only the ‘people and companies that pay them bribes’. In fact Mobutu, a one-time Belgian security agent who had shifted his primary allegiance to the CIA around the time of independence, was already the epitome of the abuses he denounced. His first coup, against independence leader Patrice Lumumba in 1960, had been financed by the US Government through the UN.1 By 1962, according to a UN audit, Mobutu had diverted enough money from foreign military-aid programs to make himself a millionaire.

Foreign bribes were Mobutu’s first route to riches. Former US National Security Council official Roger Morris has estimated that Mobutu received close to $150 million from the US in the first decade or so of his rule. In an interview, Morris emphasized that he was referring to ‘straight old-fashioned boodle... unaccountable money spent by the CIA’. Mobutu’s theft of the $1.4 million he was supposed to pass on to Angolan rebels Jonas Savimbi and Holden Roberto during George Bush’s reign as CIA director was merely the best-documented example of a frequent pattern.2

After the mid-1970s, however, direct bribes from foreign governments had a declining personal significance for Mobutu. Indeed by the late 1960s he himself was busy buying the allegiance of Western politicians. Belgian officials who received money or lucrative contracts from Mobutu included a former Prime Minister, the one-time leader of the Christian Democratic party and top civil servants in the Foreign Ministry, according to Erwin Blumenthal, who monitored Zairian Central Bank transactions for the International Monetary Fund in the late 1970s.3 Other reports have documented flows of hundreds of millions of dollars in government contracts to businesses controlled by the family of French President Giscard d’Estaing and to politically-influential Americans.

In the late 1960s and early 1970s Mobutu used the seizure of foreign-owned assets to build up his own personal wealth and create a loyal Zairian economic élite. In 1966 he announced the nationalization of Union Minière du Haut Katanga (UMHK), a Belgian-owned firm which dominated the nation’s export economy. But a negotiated settlement ultimately granted the Société Générale de Belgique (SGB), UMHK’s parent firm, a lucrative contract to manage the state-owned successor, Gécamines. According to a close Mobutu associate, UMHK would secretly kick back a portion of the royalties directly to the Zairian ruler.4

The next major cycle of expropriation was the ‘Zairianization’ campaign launched in November 1973. In its various phases, Zairianization redistributed shops, plantations, transport companies and other enterprises from European owners to Zairians. Mobutu created a personal conglomerate which controlled one-fourth of Zairian cocoa and rubber production as well as large chunks of other key crops.

Corporations, like foreign governments, found that providing Mobutu with a chance to earn money facilitated desired transactions. In one especially Byzantine deal the Mobutu Government signed several agreements with a mysterious German firm known as Orbital Transport Und Raketen Gesellschaft (OTRAG) in the 1970s. Mobutu pocketed $50 million in commissions paid by OTRAG during the two years in which it leased effective sovereignty over 29,000 square miles of Zaire’s Shaba province for a missile-testing scheme.

The Zairian State Treasury itself has provided Mobutu with his most reliable and consistent source of funds. Confidential studies by the World Bank and the IMF contain a wealth of information on this subject. The authors obtained several of the key studies from officials who were distressed by their institutions’ complicity in the concealment of Mobutu’s abuses. His presidential allowance, the annual dotation présidentielle, regularly consumed 15 to 20 per cent of the Government’s operating budget and 30 to 50 per cent of its capital budget. In 1988 this fund totalled $65 million for the year. In 1986 the Presidency and related institutions drew $172 million from the treasury, three times their official allocation.

 

Paying it back
The money Mobutu borrowed or stole is owed to the people of Zaire and must be repaid to them. Well-designed sanctions may offer the last chance of removing this corrupt ruler before Zaire collapses into fully-fledged civil war.

The proposals outlined here lack precedent in the history of international economic sanctions. Yet nothing less will work. The isolation of Mobutu should be coupled with efforts to strengthen Zaire’s pro-democracy movement.

URGENT ACTION SHOULD INCLUDE THE FOLLOWING:
[image, unknown] Freezing the foreign bank accounts of Mobutu, his family and his associates. A freeze limited to Mobutu’s personal bank accounts would be useless, because much of his foreign wealth is hidden behind the names of family members, friends and political cronies who must also be targeted. To be effective a freeze must also encompass real-estate holdings; equity interests in resorts and other business ventures; safe deposit boxes full of diamonds; and a host of other assets.
[image, unknown] Formally suspending Zaire from the IMF and World Bank. This should proceed immediately.
[image, unknown] An embargo on Zaire’s exports. Because Mobutu’s destructive regime has already driven the copper and cobalt mines to a virtual standstill, diamonds are the most important target for any embargo. Embargoing diamonds is extremely difficult, since any smuggler can carry several hundred thousand dollars’ worth in his or her pocket. Nonetheless, authorities in Antwerp, Tel Aviv, New York and other major diamond-cutting centers would – if determined to do so – have relatively little difficulty pinpointing the major buyers and sellers of Zairian precious stones. If an embargo were coupled with close observation of Mobutu’s customers and harsh prosecution when violators are caught, they will quickly turn to other diamond sources.
[image, unknown] Banning weapons sales to the Mobutu regime. An arms embargo is symbolically important but has relatively little practical meaning because Mobutu’s power rests on weapons already in-country. Mobutu controls the soldiers only to the extent that he pays their salaries.
[image, unknown] Expelling Mobutu’s ambassadors from Western capitals. Mobutu’s last presidential term expired in 1991. While the US and the European Community have repeatedly declared that they view the High Commission for the Revolution as Zaire’s legitimate highest authority, this stance has not yet been consistently translated into policy.

Steve Askin and Carole Collins

Hundreds of millions of dollars have disappeared annually from the state treasury without even an indication of how, when or why the funds were taken. A 1989 World Bank study showed that fully 18 per cent of the year’s state expenditures went on unexplained ‘other goods and services’; in 1986 these absorbed $269 million. According to World Bank experts who have examined Zairian state financial records, much of this money appears to have been spent on luxury purchases or superfluous military hardware.

Embezzlement of export proceeds may now be the most lucrative ‘pillar’ of Mobutu’s system. Over the past dozen years repeated studies by the World Bank and other institutions have documented diversions of $150 million to $400 million a year from the nation’s copper and cobalt revenues. The upheavals of the past four years cut copper and cobalt production to perhaps one-tenth of historic levels. Diamond smuggling has now become the main source of foreign earnings for Mobutu and his associates. In 1992 alone this may have netted as much as $300 million.

Western governments and multilateral institutions have known at least since the mid-1970s that money lent to the Mobutu regime was likely to disappear without explanation. In some cases loan proceeds were directly stolen, in others they were squandered on projects which enriched no-one except Mobutu or a few politically-favored foreign investors. Former Wall Street Journal reporter Jonathan Kwitny rightly concluded that almost none of Zaire’s foreign debt ‘arises from anything that much benefited the Zairian people, who are being slowly starved to pay it off’. Zaire’s accumulated foreign debt has soared to $10 billion.

Western governments, fully aware of the abuses, continued to deliver foreign aid grants and concessional loans as direct payoffs for Mobutu’s political services. In 1983, after Zaire sent troops to defend US-backed Chadian President Hissen Habre, President Reagan praised Mobutu’s ‘courageous action’. A few months earlier the US Embassy in Kinshasa had warned Washington that any monitoring of expenditures was impossible because ‘major diversions of funds and goods are made by the barons of the regime’.

By the time that the West African wave of democratic protest swept across Zaire in early 1990, Mobutu’s most important backer, the US, was far from ready to abandon him. A May 1990 massacre at the University of Lubumbashi brought swift protests from two of Mobutu’s three most important foreign backers, France and Belgium. But Mobutu’s 20-year friendship with former President George Bush insulated him from effective outside pressure.

A pro-democracy movement flowered despite murderous repression and international isolation. Yet Mobutu shrewdly rode the wave of protest, as he does to this day. He offers minor reforms followed by major disreforms, buys the support of some oppositionists and sends troops to kill or threaten others.

Soon after President Clinton took office State Department officials started talking with their French and Belgian counterparts about a possible freeze on Mobutu’s foreign assets. They are still talking.

Steve Askin – whose writing on Zaire has appeared in Business Week, the Christian Science Monitor, The Observer and elsewhere – and Carole Collins are overdue on their long-promised book about the Mobutu kleptocracy. This article is adapted from the Review of African Political Economy No 57:72-85.

1 Carole Collins, Africa Today, 3rd Quarter, 1992.
2 John Stockwell, In Search of Enemies: a CIA Story, WW Norton, New York, 1978.
3 E Blumenthal, Zaire: rapport sur sa credibilité financière internationale, 7 April 1982.
4 Africa Now, March 1982.

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