How to steal from Africa perfectly legally

As the UN Economic Commission for Africa recently observed, it relies on asking key power players in a nation’s economy what they think of the level of corruption. Many of those are foreign investors. Using this approach a country like Zambia will unsurprisingly tend to rank high on corruption – 76 worst out of 168. Meanwhile, Switzerland will rank low – 7th.

But the perfectly legal transfer of the wealth of Africa to Europe isn’t captured by this index. As TI notes, “Many ‘clean’ countries have dodgy overseas records”.

Consider this: the number one destination for Zambian copper exports is Switzerland, which in 2014 accounted for 59.5% of the country’s copper exports. Yet Switzerland’s own imports that year scarcely contained any mention of copper at all. Had the African country’s main exports just vanished into thin air?

The 2015 figures suggest that in fact much of these exports were destined for China (31%), though Switzerland remained the number one destination (34%).

The answer to where the money goes lies in accountants’ alchemy. International corporations present their books in such a way that they pay as little tax as possible in either Zambia or China. And they don’t pay much in Switzerland either – because the Swiss don’t demand it.

Suddenly the ranking of Switzerland, 69 places ahead of Zambia in the honesty league, looks a bit suspect. But of course it’s all perfectly legal.

From Zambia’s point of view, what counts as corruption is defined by the rich and powerful. When their country is robbed blind by clever accounting tricks, against which their government and people have no recourse, it is just the operation of a free market controlled – as free markets so often are – by corporations that have enough power to set the rules.

Another little noticed but significant feature of illicit financial flows from Africa is that there are occasional reverse flows. The movements back into African countries aren’t as big as the outflows, but they are important.

What is happening here is “round-tripping”: spiriting funds away to a safe place so they can be brought back, with their origins unexplained, and no questions needing to be asked.

The same multinational corporation that is defrauding an African country can pay money into the offshore account of one of its political leaders. Or that leader can whisk funds away by other means.

Our main concern here isn’t the money invested in real estate in France, yachts, fast cars, or foreign business ventures. These are personal insurance policies in case things go wrong at home, or tickets to the global elite club.

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