Private Investors Plunder Poorest African Nations
Universal access to education, the elimination of poverty and the improvement of health care systems will remain a utopia for Africa as long as powerful nations continue to drain most of the financial resources of the region by enforcing the collection of their monstrous foreign debts.
The drop in value of raw materials on the international market has led to reduced national revenues in Africa, destined to pay off foreign creditors.
In addition, it has become harder for these countries to obtain new loans since financial funds have been largely frozen. If they do manage to secure a loan, these come with even higher interest rates or are granted in exchange for unacceptable political interventions, and the majority of the loan goes back to the coffers of discredited international organizations, such as the World Bank and the International Monetary Fund, in compensation for old debts.
In the context of the current international crisis, these poor countries are at risk of running into a “new” debit crisis, since they have reduced revenues to pay for old debts and boost national development programs.
Once again, the IMF and the World Bank come to the “rescue” with solutions to “revive” depressed African economies. Evens the help promised by powerful nations is being channelled through unfair loans with the usual conditions: the acceptance of neoliberal policies and completely opening economies to transnationals.
African countries only have two options: accept “help” from the IMF and the World Bank in exchange for privatization and the reduction of public budgets; or renounce the “help” only to see their social expenses reduced anyways, since exports and foreign investment revenues fall in times of crisis.
Several experts and NGOs, who for years have been demanding the cancellation of African nations’ foreign debts, are concerned about this new wave of loans and the danger they pose to the future of these weak economies.
Meanwhile the vultures are circling overhead, waiting for their prey to die so that they can dig in. The simile perfectly fits a group of investors who over the last few years have hastened to buy the debts of poor countries, and then rush to recover their investment through the seizure of goods, lawsuits, political pressures and blackmail that yield much more money than what they originally paid for the debt.
According to the Jubilee Debt Campaign NGO, in the last few years, at least 54 companies, most of them based in tax havens, have sued twelve of the poorest countries in the world for a total of US $1.5 million.
In September 2004, New York’s FG Hemisphere Fund sued the Democratic Republic of Congo for US $105 million, for an original loan of US $30 million borrowed in 1980 during the Mobutu Sese Seko dictatorship. Sese Seko, a partner of Washington and Europe, amassed a personal fortune of US $8 billion —two thirds of the $12 billion Congolese debt.
The ruling of a Washington court in favour of FG Hemisphere obliges Congo to pay $80,000 dollars a week.
In 1979, Zambia purchased agricultural equipment and services from Rumania worth US $15 million. Unable to service this debt, in 1999 Zambia and Rumania agreed to liquidate it for $3 million. However, before the Zambia could seal the deal, Donegal International Ltd —a US-owned company registered in the British Virgin Islands—bought Zambia’s debt for $3.3 million and then sued the impoverished country for an outrageous amount of $55 million.
Zambia was therefore prevented from allocating the debt cancellation gains to infrastructure, healthcare and education.Donegal International Ltd is also threatening the Congo’s economy by demanding $400 million for a debt this vulture company bought at the cheap price of $10 million. Hamsah Investments and Wall Capital —registered in tax havens in the Caribbean, the British Virgin Islands and the Grand Cayman Islands— sued Liberia for $20 million in November 2009. In 2002, Sifida and FH International bought up from the America's Chemical Bank a $6 million debt contracted by the Liberian government back in 1978. Then, these vultures sued Liberia for the $18.38 million dollar debt plus interests and legal fees.
Liberia’s debt had been sold first to Red Barn and FH International in June 200, and ultimately to Hamsah Investments and Wall Capital.
Hypocritical policies of the International Monetary Fund and the World Bank
In 1996, the International Monetary Fund (IMF) and the World Bank (WB) launched the Heavily Indebted Poor Countries Initiative to provide comprehensive debt relief to the world's poorest, most heavily indebted countries; therefore creating an illusion of commitment to helping reduce poverty.
However, in order to be eligible for debt relief, the World Bank and IMF forced South countries to adopt structural adjustment programs disguised as Poverty Reduction Strategic Papers (PRSP), coercing these countries to take out new loans to pay off old loans, and the vicious circles continues.
Profiteering is the only motive of these ruthless vultures, even if their victims are among the heavily indebted poor countries. They justify their actions by claiming these countries should pay what they owe. In statements to the Times—one of the most influential British newspapers—Kensington International and Elliott Associates manager Jay Newman had the audacity to say that his companies do not acquire debts from countries unable to service them.
The IMF and the World Bank have acknowledged that the countries in question are actually unable to pay their old debts —let alone the large sums of money claimed by the vulture funds—, clearly demonstrating their poverty reduction initiatives to be hypocritical and vain.
Take the example of Zambia, an African country with the highest HIV rate of the planet, with only 600 doctors to provide care for a population of 12 million.
When vulture funds prey on the world’s poorest countries, they plunder their scarce financial resources, which could be otherwise directed to enhance public sectors such as healthcare and education.
Africa remains the most exploited continent by western powers. With insufficient healthcare services and the largest part of its population exposed to pandemics such as HIV and malaria, funding is never enough.
Attacking the root causes of the problem
The African Legal Support Facility was established in Tunisia on June 29, 2009 as an initiative of the African Development Bank, to provide legal support for the countries being exploited by vulture funds. Unfortunately, this initiative lacks perspective and is only aimed at negotiating lower settlements of vulture funds lawsuits and providing court costs.
The battle against poverty requires more than scattered unilateral actions by some South countries who decide to cancel their public debts. To make a difference, North countries also need to have the political will to implement policies to prevent these appalling companies from profiting from poverty. Attacking the root cause of the problem entails a genuine and unconditioned cancelling of poor countries’ foreign debts, which are illegitimate and unjust.
