A
surprise judgment was made recently against a vulture fund, FG
Hemisphere, striking down its claim for $100m from the Democratic
Republic of Congo. FG Hemisphere has spent many years and a small
fortune pursuing Congolese dictator Mobutu Sese Seko for a debt it
bought "secondhand" for $3m, but on which it hoped to claim back $100m.
Most recently it has been trying to grab the assets of Congo’s
state-owned mining company, Gécamines, through a joint venture in which
it is invested on Jersey.
The DRC has vast mineral wealth including diamonds, copper, oil and gas; one estimate puts the value of these resources at $24 trillion. However, it is pretty much the poorest country in the world. The reason is centuries of plunder, at its worst involving the buying, selling and brutalisation of millions of people. But plunder today continues in different guises – through odious debt and tax avoidance.
It seems incredible that so rich a country can end up in serious debt, until you think about the amount of money leaving the DRC through the other crucial factor in its impoverishment: unpaid taxes. Although the DRC has been a poor reporter of data, it has been estimated that, between 1970 and 2008, more than $6bn left the country illicitly. This is equivalent to about 1% of the economy every year – more than enough to cover its total outstanding debts. The figures suggest that an average of $170m has left the DRC every year, almost two-thirds of the average $300m it has to make in debt service payments. Little wonder that its debt is starting to rise again, and is expected to reach $7.5bn by 2015.
As Africa is celebrated for its growth rates, the amount of taxes lost to the continent accelerates. The funds flowing in, lauded by Tony Blair, Sir Bob Geldof and their ilk, will primarily enrich those already at the top, fuel inequality and expand dependence on a crony form of finance. Vultures will increasingly swoop on these riches.
http://cadtm.org/Africa-s-
The DRC has vast mineral wealth including diamonds, copper, oil and gas; one estimate puts the value of these resources at $24 trillion. However, it is pretty much the poorest country in the world. The reason is centuries of plunder, at its worst involving the buying, selling and brutalisation of millions of people. But plunder today continues in different guises – through odious debt and tax avoidance.
It seems incredible that so rich a country can end up in serious debt, until you think about the amount of money leaving the DRC through the other crucial factor in its impoverishment: unpaid taxes. Although the DRC has been a poor reporter of data, it has been estimated that, between 1970 and 2008, more than $6bn left the country illicitly. This is equivalent to about 1% of the economy every year – more than enough to cover its total outstanding debts. The figures suggest that an average of $170m has left the DRC every year, almost two-thirds of the average $300m it has to make in debt service payments. Little wonder that its debt is starting to rise again, and is expected to reach $7.5bn by 2015.
As Africa is celebrated for its growth rates, the amount of taxes lost to the continent accelerates. The funds flowing in, lauded by Tony Blair, Sir Bob Geldof and their ilk, will primarily enrich those already at the top, fuel inequality and expand dependence on a crony form of finance. Vultures will increasingly swoop on these riches.
http://cadtm.org/Africa-s-
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