To some of you who understand Southern Africans you need to realize i look forward to Ken Yamamoto as much as i look forward to my Beer and Biltong ,i just cannot do with out it or wait for the next piece so without further ado here is Ken
by Ken Yamamoto
“Each time there is a dignitary visiting the country, the Mugabes have to take them to Mazoe to show them a dairy business they run, packing milk and yoghurt.
“Everything else is dying around him, except his business. All he has to show is a yoghurt making plant, built on money that saw the death of several other businesses.”
WITH no one to turn to, the Zimbabwean citizenry will remain at the mercy of its leadership, which is no doubt a bloodthirsty mafia. Robert Mugabe, and his machinery, to quote Matt Taibbi is “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”
Between 2007 and 2008, a mining house, Mwana Africa sourced eight million United States Dollars (US$8 000 000) for its Zimbabwean mining operation, Bindura Nickel Corporation, best known as BNC. At that time, I was doing commissioned research on Zimbabwe’s hyperinflation, which was unprecedented ever in the southern hemisphere. The money was supposed to be used for refurbishing BNC’s smelting plant and its mining operations. At the same time, unfortunately Robert Mugabe’s mafia leadership, fronted by one Gideon Gono, a man who at that time enjoyed unfettered power and knew how to use it, had so much hunger for the greenback. Before BNC commenced its project in pursuit of its commercial interest, the $8 million disappeared from its bank account. BNC endured further theft of $1 million taken from its Trojan Nickel Mine Limited’s account held at a local bank, called BancABC.
Brazen Theft With Long-running Consequences
BNC was by no means the only victim with money stolen from its bank accounts. In October 2013, the Supreme Court of Zimbabwe issued a judgment against Standard Chartered Bank in the case of Standard Chartered Bank Zimbabwe Limited versus China Shougang International, in which Shougang International sued the international bank for money stolen by the Reserve Bank of Zimbabwe (RBZ), headed by Gideon Gono at the time. In the appeal by Standard Chartered Bank before Zimbabwe’s Supreme Court, the bank contented that it was not responsible for the stolen money because the fact that the money was stolen at the RBZ, it was a “supervening impossibility”. The judges of appeal summarized the case as follows:
Standard Chartered Bank Zimbabwe… is a commercial bank … operating in Zimbabwe. The respondent is a company … carrying on business in Redcliff, Zimbabwe. … a foreign investor whose specific purpose was the refurbishment of the blast furnaces of a Zimbabwean steel manufacturing company popularly known as Zisco Steel. In October 2007, the respondent held two accounts with the Kwekwe branch of the appellant…. [with] an aggregate credit balance of US$47,739.86.
In terms of a directive issued by the Reserve Bank of Zimbabwe … sometime in October 2007, the appellant transferred, to the RBZ, the total credit balance of US$47,739.86 from the two accounts… [directive] purportedly issued in terms of s 35 (1) of the Exchange Control Regulations 1996 SI 109 of 1996… When the respondent demanded payment … of the monies deposited in the accounts, the bank refused to repay. It claimed that the intervention of the RBZ had rendered it impossible for it to comply with its contractual obligation to make payment to the respondent.
Now, I don’t need to emphasize that any foreign investor would shiver at the prospect of this level of violation of private property rights and expropriation of bank balances. I also don’t need to mention that Ziscosteel has been dead since. The clever judges would hear none of the Standard Chartered Bank’s hiding behind the finger. They concluded that,
“… the dealings by the appellant with the deposits in the accounts, namely, the payments to the Reserve Bank of Zimbabwe, were made at its own risk and did not affect its obligation in law to pay its debt to the respondent on demand.”
The case of BNC and that of Shougang International are just but two cases of unmitigated theft on a national scale by the RBZ and the Government of Zimbabwe led by Robert Mugabe. The consequences of the looting as can be seen in Zimbabwe now are too ghastly to contemplate. Foreign investors now know that at Mugabe’s instruction, his lieutenants can spirit money away from accounts. But let’s trace a little further the consequences of the theft of money from BNC’s accounts.
Soon after the theft, BNC placed its mines under care and maintenance, laying off employees. It also scaled down its contribution to the economy, creating a negative economic multiplier effect. We can safely say BNC never recovered from this grand theft. For the next five years after the bank account robbery, BNC largely remained under care and maintenance. In an update to investors in 2011, the company said;
“The BNC assets remained on care and maintenance for the quarter ending 31 March 2011 and this programme continues to successfully maintain the integrity of the BNC assets. BNC has continued to sell in-process inventory and dispose of quoted shares to raise cash. This has enabled the corporation to meet the costs to date of the care and maintenance programme, Trojan pre-start activities and partial payment of balances owed to creditors from own resources.”
Even though BNC managed to raise funding for its operations, and has restarted processing nickel from its operations up to concentrate level, it’s Bindura Smelter and Refinery Complex remains under care and maintenance, and I shall come to this point later.
So what is the cost of the theft of funds by Mugabe and his lieutenants? It’s massive: loss of thousands of direct jobs, a further loss of thousands of indirect jobs, loss of business for downstream activities and loss of funds to the fiscus through general downstream damage to other attendant economic activities.
Disempowerment of blacks by blacks
Mwana Africa, fronted by a Congolese, Kalaa Mpinga had to source funds to get BNC on its feet again. Apart from other small investors, the company raised funds from China International Mining Group Corporation, a company fronted by or related to Yat Hoi Ning. Fast forward to mid-2015, and Mwana Africa and its Zimbabwean assets have been taken over by Yat Hoi Ning and his related parties. Mpinga and his Zimbabwean team were, to use a phrase often used by the Zimbabwean state media “booted out”. The hostile takeover of the company by Chinese investors was complete. To be clear, there is nothing wrong about Chinese investors legitimately taking over a business. The key issue here is the genesis of the problem that weakened BNC to the point where black investors lost the company to non-Africans.
Consequences to value addition
Robert Mugabe loves to go around the continent purporting to be a statesman, parroting high-sounding ideals and causes such as value addition, meant to portray him as intelligent and savvy, even convening a SADC meeting to discuss that. Early this year, he had this to say at a SADC meeting on industrialization, itself a subject of my future article;
“There is therefore, need for collective action on our part to put in place effective strategies to boost the productive capacity of our industries. Enhanced productive capacities will enable our industry to reap the benefits from the market opportunities created by trade liberalization.”
When you take the BNC case study, it is easy to see that the company was actually disempowered by Mugabe’s government through the RBZ. Today, BNC can only export nickel concentrate to companies like Glencore, and to China. It cannot export processed nickel metal because its smelter has been under care and maintenance for years on account of the theft by the government mafia. On what basis then does Robert Mugabe go around talking about value-addition when he actively disempowers companies from value-addition in his backyard?
Stolen Funds and Taxpayer Footing the Bill
The money stolen by the RBZ on behalf of Zimbabwe’s mafia leadership forms part of the huge debt the Zimbabwean government has assumed. This debt when added to the billions Zimbabwe already owes renders the country technically solvent.
The takeover of this debt, for good reason, became a point of controversy in Zimbabwe’s parliament as Zanu PF parliamentarians voted for the government to takeover this debt. What exactly does this mean? We must interrogate further.
First, it means the thieves, led by Robert Mugabe, get away with clean hands, and hold onto the assets bought using stolen funds. Secondly it means the average Zimbabwean, both human and corporate, is going to be squeezed to pay back the money while the grand theft robbers enjoy the loot. Thirdly, the problem with a tax-and-spend mafia is that they don’t know when to stop until they bleed you to death. The taxpayer will be squeezed to the bone marrow. They will tax the food you eat, the water you drink, the house you live in, and if they could, tax the air you breathe.
Mr Obert Mpofu, an alleged crook (he is accused by a liquidator of cheating a bank he purportedly owned of millions of dollars’ worth of properties, and the national road authority, ZINARA, is literally running on a fleet from his car rental company called Impala Car Hire) is on a mission to build more toll gate gantries including in Harare’s CBD. The commissioner of taxes is on a mission to tax churches and thousands of vendors. They don’t know where to stop.
Fourth and finally – the juicy part – is the analysis of the consequences of taking over the RBZ. The devil is in the details. RBZ owed creditors $1.35 billion. It’s all overdue because they should have paid it years ago. That means it’s on immediate call. But we also know that Robert Mugabe’s government is broke, and the only reason he remains president and sleeps well at night is because he has no shame.
Zimbabwe proposed a 2015 budget of $4,1 billion. Assuming all the RBZ creditors threaten foreclosure, pushing the government to pay on demand, the debt will wipe away 31% of the 2015 budget. But then, you and I know that the 2015 budget is overstated, the revenue collections will be below projections, and a majority of the budget is going to pay civil servants, this leaves the government in a more desperate and clueless situation than we think. With no one to turn to, the Zimbabwean citizenry will remain at the mercy of its leadership, which is no doubt a bloodthirsty mafia. Robert Mugabe, and his machinery, to quote Matt Taibbi is “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”
While millions of dollars were disappearing from company accounts, Mr. and Mrs. Mugabe have been making great progress, buying properties here in the Far East and building a family business by hook and crook. While Robert Mugabe lied that he did not own the property in Hong Kong, claiming that “…we just want accommodation for our daughter and her friends …” the lawsuit he instituted in Hong Kong proves that he was conned of a property worth HK$5 million which he could only have bought using US dollars with money stolen from Zimbabweans because it is well-known that at the time, Zimbabwe had an acute shortage of foreign exchange.
At around the same time, Grace Mugabe spent over $1 million in a transaction in which she was conned a second time by the same Asian businessman Ping Sung Hsieh in a matter that spilt into the courts in Zimbabwe and South Africa. Not only were the Mugabes trying to build a trucking business, but they spent millions building a dairy factory north west of Harare – Alpha and Omega Dairy.
While they claim that they borrowed money from local banks, it is common cause that there was an extensive shortage of foreign exchange at the time which affected every business. While businesses were suffocating due to lack of foreign exchange, Mr and Mrs Mugabe were building a well-financed dairy start-up from the ground up. Needless to mention that, at that time, Zimbabwe had a cholera outbreak that killed 4,293 people and spread to Botswana, Mozambique, Zambia and South Africa, making it the worst cholera outbreak in Africa since 1993.
The challenge now is that when you destroy the economy from which your business is supposed to thrive, that business will fall on your sword. At a political gathering last year, Grace Mugabe mourned that people could not buy her products. “I manufacture yoghurt but no one buys it,…You can’t even find a person who can buy a packet of milk,” she mourned. At a youth conference last year, Mugabe told youths that his business had not broken even.
When you have nothing else to show
Due to extensive pillage, the Zimbabwean economy is in the intensive care unit. There isn’t much production going on. While Mugabe loves to celebrate the presence of resources, the mining companies are also reeling under a poor economic climate and shortages of power among other ills. These days he talks less about diamonds because there isn’t much coming from there. It’s a scandal writ large.
And what is Mugabe, the supposed pan-Africanist giant’s way out? Each time there is a dignitary visiting the country, be they ministers, heads-of-state or anybody else of importance, they have to take them to Mazoe to show them a dairy business they are running, packing milk and yoghurt. Everything else is dying around him, except his business. All he has to show is a yoghurt making plant, built on money that saw the death of several other businesses.
A Dying Kleptocracy
A kleptocracy is often associated with a ruling class which treats a country’s treasury as a source of personal wealth, spending funds on luxury goods and extravagances at their whims and caprices. Many kleptocratic rulers secretly transfer public funds into secret bank accounts in foreign countries to create a nest for themselves if removed from power. They normally buy apartments and properties abroad. Their children stop going to local schools and also live abroad. Their wives shun local styles and shop abroad, even for trinkets and petty things like manicure. They shun local facilities and seek medical help elsewhere because they cannot trust their own.
A few years ago, I watched a South African movie called Tsotsi. Tsotsi means a thief. I have coined the term tsotsiocracy to describe the system that Mr Mugabe leads.But every tsotsiocracy goes one way. It collapses leaving the country a banana republic. The best case scenario is if the citizens pull together to rebuild, but the worst case scenario is chaotic.
When Mobutu Sese Seko ran Zaire, now the DRC, they say he treated the national purse and national institutions like his own. When he died, he had a personal fortune estimated to be over $5 billion dollars. During his days in power, he looted the treasury without ceasing until he bled the country dry. In his hey-day, Mobutu ended up just paying his Presidential Guard because his safety depended on them, leading to the popular saying that “civil servants pretended to work while the state pretended to pay them”. With the regular shifts in pay dates in Zimbabwe, the country is on a slippery slope and going the Mobutu way.
One Mobutu official described how they looted the country’s treasury this way: Mobutu would issue an instruction to an official to pay-out someone $10 million. That official would further instruct another to process a payment of $100 million. By the time the actual funds are released by the central bank, half a billion would be withdrawn on a $10 million dollar instruction. This is similar to the way the RBZ ended up owing over a billion dollars, leaving officials top central bank officials owning several properties and businesses around the country.
Mobutu’s daughter Yaki married a Belgian, Pierre Janssen. Janssen later revealed that Mobutu worried not about the cost of gifts he gave to cronies. Yaki’s lavish wedding ceremony had a US$65,000 wedding cake, she wore a US$70,000 wedding gown plus US$3 million worth of jewels. They also hired three orchestras and set off a giant fireworks display. Does that ring a bell somewhere in Zimbabwe?
What eventually happened to Mobutu is well-known. The level of pillage that Zimbabwe has gone through under Mugabe’s watch is no different except in scale.
One of the most profound African leaders to ever come out of the continent was Thomas Sankara of Burkina Faso (which means land of the upright). When he took over the leadership of that country, he gave a reverting speech on 2 October 1983 in Ouagadougou, where he said;
“Upper Volta nationals began… to organize the systematic looting of our country… they … transformed gradually into a truly parasitic bourgeoisie, not knowing (how to) retain their voracious appetites. Driven by their own selfish interests, they will stop … developing large-scale corruption, misappropriation of funds and public things, influence-peddling and real estate speculation, practicing favouritism and nepotism. This accounts for all the financial and material wealth they have accumulated on the backs of working people.
And not content to live on the fabulous rents they derive from the shameless exploitation of their ill-gotten gains, they play the feet and hands to grab political responsibilities that allow them to use state machinery to benefit their operations and their mismanagement. Their children are deserting school in the country for a prestigious education in other countries. At the slightest illness, all means of the state are mobilized to ensure their costly care in luxury hospitals in foreign countries.”
Rings a bell? Sankara further said;
“The state revenue fund, in addition to the effort of national investment, the government (is) spending 70 percent … which goes to pay salaries of civil servants and to ensure the functioning of administrative services. What can remain for social and cultural investments?”
Until Zimbabwe is a skeleton, Mugabe, his wife and the tsotsiocracy will keep pecking at the carcass.
Ken Yamamoto is a research fellow on Africa at an institute in Tokyo. He researches and travels frequently in Uganda, Kenya, Rwanda and Zimbabwe. Yuki Nakata contributed in this article. You can contact Ken on firstname.lastname@example.org.