Commissioned grandly by the UNDP, the development arm of the UN, GFI’s
report explores the flow of illicit financial flows from Least
Developed Countries (LDCs), of which Ethiopia has been an enduring
mainstay. (Many countries, some in Africa, have moved up the ladder of
development.)
Covering the 18 years between 1990 and 2008, which are all, but one,
1990, within the realm of EPRDF’s reign, the report includes Ethiopia,
one of the world’s most impoverished countries, in the top ten
countries from which funds have been transferred illegally into banks
and offshore financial centers in developed countries. The amount: a
whooping 8.4 billion US dollars, which places Ethiopia at a shocking
9th place in the world, just below resource rich and gruesomely
autocratic Myanmar with 8.5 billion dollars.
The report attributes the bulk, 65 to 70 percent, of Ethiopia’s
illicitly transferred funds to trade mispricings. Somewhere in the
remaining 30 to 35 percent — up to 3 billion US dollars — are the
laundered monies of corrupt government officials, almost all
exclusively members of the EPRDF.
Clearly, some EPRDF officials are amply prepared for a comfortable
exile. And there are of course others who believe in the fairy tale of
the party’s invincibility and see no need for a contingency plan. This
will most probably be their wakeup call. The haste not to be left
behind is now inevitable. The worst for the nation is yet to come.
Export figures released by the Ministry of Trade in late February 2011
show coffee still dominating the sector. Of the infinitesimal 1.14
billion US dollars the nation earned in six months from goods sold
overseas in 2003 (in the Ethiopian calendar), 320 million dollars were
attributed to coffee.
Guna Trading House PLC, a holding of the Endowment Fund for the
Rehabilitation of Tigray, EFFORT, a business empire managed
exclusively by senior members of the EPRDF, is an exporter of coffee.
Guna is also a significant exporter of sesame seeds, another key
export for the nation. Moreover, it has involvement in the import
business.
There is no conclusive proof that EFFORT’s holdings are involved in
trade mispricings, but the possibilities that exist for party leaders
are cause for particular concern. Perhaps, only the tenure of Seye
Abraha, who was EFFORT’s CEO before his fallout with Meles Zenawi and
subsequent six years imprisonment, has been thoroughly scrutinized.
(He came out clean.) With the EPRDF’s obvious old boy’s network
cutting across party, government, and business circles, EFFORT is
suspected by many of being a convenient conduit for illicit financial
flows. But again, the hard proofs are lacking so far. (Ditto for the
much smaller EPRDF affiliated endowment funds for other regions.)
Gold is now Ethiopia’s second biggest earner of foreign currency,
bringing in about half as much as coffee. Most of it is exported by
MIDROC, owned by Mohammed Al-Amoudi, an Ethio-Saudi billionaire, who
owns the largest gold mine in the country. With hundreds of millions
of dollars earned from exports, MIDROC is easily the nation’s
principal exporter. Though instinctively apolitical, Al-Amoudi’s odd
affiliation with the ruling party has long raised eye-brows. But even
here, there is nothing more than a lingering suspicion that there is
more than meets the eye.
A favorite of corrupt officials everywhere is of course kickbacks. A
kickback is the difference between market price and inflated payment
to a company that wins a government contract. It’s a favorite of third
world dictatorships. And though practiced at all levels of government,
the real money is with foreign companies, which is an exclusive
preserve of senior officials. Arms procurement is their particular
favorite. Interestingly, kickback from arms purchases was an issue
during the wrangling for primacy between Meles and his critics in the
EPRDF ten years ago. None of the charges were ever proved.
The $8.4 billions stolen from Ethiopia have no doubt mostly disappeared
into the black hole that is offshore banking. This is a huge part of
international finance; more than 6 trillion US dollars lie there. The
IMF estimates the illicit funds laundered annually by offshore banking
at 1.5 trillion US dollars (of which half a billion is thought to come
from fraud and corruption.) And until recently, Swiss was the favored
haven. But since 2008, others, amongst them the Cayman Islands, have
risen in popularity. The deposits in Cayman Island, whose population
is only 54, 878, is estimated to hover around 1.9 trillion US dollars.
In Africa, Ghana aspires to be the new destination for international
offshore banking. There are abundant reasons to shun infamous
Switzerland.
Beyond the cruelty of stealing billions that could have gone a long
way, in the words of UNDP, “to help children go to school, help
mothers give birth safely, and expanding access to basic health care,
better nutrition, and clean water and sanitation for all,” is the
question of how this grand theft was possible.
The answer is simple: feeble rule of law; suffocated civil society;
suppressed free media; nominal judicial independence; patronage based
civil service—in sum, absence of a democracy with checks and
balances. Where there is despotism there is corruption; particularly
in the presence of a private sector. The problem is compounded when
politics and business mix, which is the case for Ethiopia.
The extent of corruption in Ethiopia, as indicated by the stolen 8.4
billion dollars, is a shocker not only to the naïve supporters of the
EPRDF but also to its severest critics. Simply put, no one imagined it
to be this big. But it is, and the problem requires an urgent remedy.
This is money that has been stolen from Ethiopians, including all but
a handful of the alleged 5 million members of the EPRDF.
Rest assured that the time for accountability will come in due time.
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