The Looting Machine: Warlords, Tycoons, Smugglers and the Systematic Theft of Africa’s Wealth

Okolie had grasped a central truth about how resource states work. Demanding their rights from their British colonial rulers, the American revolutionaries declared that there would be no taxation without representation. The inverse is also true: without taxation, there is no representation. Not being funded by the people, the rulers of resource states are not beholden to them.

Taking Africa as a whole, for every six dollars that governments bring in from direct taxation – taxes on personal income and company profits – they bring in ten dollars from taxes on the extraction and export of resources.19 In Mali gold and other minerals account for 20 per cent of government income; in Chad, an oil producer, resource revenues are more than half the total. In Nigeria the sale of crude oil and natural gas generates about 70 per cent of government revenue; in newborn South Sudan the figure is 98 per cent. Taxes, customs receipts and revenues from the sale of state assets – the things on which industrialized nations rely to fund the state and that require the acquiescence of the population – matter far less than keeping the resource money flowing. Nigeria’s GDP recalculation in 2014 showed that, once taxes from the oil industry were stripped out, the government relied on the people for just 4 per cent of its income.20

The ability of the rulers of Africa’s resource states to govern without recourse to popular consent goes to the heart of the resource curse. The resource business ruptures the social contract between rulers and ruled – the idea, shaped by political philosophers such as Rousseau and Locke, that a government draws its legitimacy from the consensual sacrifice of certain freedoms by the people in exchange for those vested with authority upholding the common interest. Instead of calling their rulers to account, the citizens of resource states are reduced to angling for a share of the loot. This creates an ideal fiscal system for supporting autocrats, from the Saudi royal family to the strongmen of the Caspian states. And data collected by Paul Collier, a professor at Oxford University who has spent his career studying the causes of African poverty, suggest a still more insidious effect. ‘The heart of the resource curse,’ Collier writes, ‘is that it makes democracy malfunction.’21

Collier estimated that once natural resource rents exceed about 8 per cent of GDP, the economy of a country that stages competitive elections typically grows 3 percentage points more slowly than an equivalent autocracy’s economy. Collier’s research suggests that, in countries where a significant share of national income comes from natural resource industries, the purpose of elections is subverted. Normally electoral competition is healthy, ensuring some accountability for elected officials. Political parties can be turfed out of office. In the resource states that go through the motions of democracy, however, the rules governing both how power is won and how it is used are turned on their head. Greater ethnic diversity makes things worse, generating greater demands on the patronage system. ‘Where patronage politics is not feasible, the people attracted to politics are more likely to be interested in issues of public service provision,’ Collier writes. ‘Of course, for societies where patronage is feasible, this works in reverse: democratic politics then tends to attract crooks rather than altruists.’ Collier has a name for this law of resource-state politics: ‘the survival of the fattest’.

Maintaining power through patronage is expensive. But self-enrichment is part of the prize. And all that stolen money has to go somewhere. Some of it is used to pay off patronage networks. Some of it buys elections. Much of it goes overseas: according to a US Senate report, kleptocrats from African resource states have used banks, including HSBC, Citibank and Riggs, to squirrel away millions of plundered dollars in the United States alone, often concealing the origin of their wealth by shifting funds through secretive offshore tax havens.22 But some of it needs to be laundered at home.

An hour or two through Lagos’s suffocated thoroughfares from the electronics market at Alaba, on a leafy avenue close to the financial district, Bismarck Rewane oversees an office full of phenomenally bright young Nigerians trying to fathom the mysteries of the world’s twenty-sixth-largest economy. Slick-haired and loudly pinstriped, Rewane is one of Nigeria’s shrewdest financiers and a trenchant critic of the misrule that has turned a country of immense potential into the sorry mess that it is. Some of the distortions that trouble him are glaring: the effects of oil on inflation, the exchange rate and the financial system. But one of the biggest is almost undetectable: the effect of stolen money being injected back into the economy.

‘Money is trapped in the hands of those who need it for maintaining power through patronage,’ Rewane told me. ‘It can’t be invested openly because it has to be hidden.’ The effects of all this clandestine money sloshing through an underdeveloped economy are almost impossible to gauge. Because money launderers are seeking primarily to turn dirty cash into other assets as quickly as possible rather than to turn a profit or invest prudently, they are happy to pay more than a fair price for goods and services. That distorts everything, from banking to real estate. It furthers the accumulation of a country’s prime economic assets in the hands of the minority, just as Sonangol, the Angolan state-owned oil company that is the engine of the Futungo’s looting machine, has expanded into property, finance and aviation. Then there is the dirty money that is simply parked in bank accounts or basements rather than stimulating the economy by circulating. When I asked Rewane how much money he thought was trapped, he laughed. ‘That’s the million-dollar question.’ I asked him what the consequence of all this skulduggery was for the Nigerian economy as a whole. ‘When you have an imperfect economy where all money is dirty money, you will just have a completely dysfunctional economic arrangement.’

Where legitimate business cannot thrive, crime flourishes. Mafias from New York to Naples work by creating scarcity and controlling supply. Northern Nigeria’s Mafiosi are no different. Dahiru Mangal might not have been responsible for the collapse of the electricity network and the crumbling roads that crippled the Nigerian textile industry – Dutch Disease and oil-fuelled corruption took care of that. Neither is he the sole corrupter of the Nigerian customs service – Shell has admitted paying bungs worth $2 million between 2004 and 2006 to Nigerian customs officials to smooth the importation of materials for Bonga, its giant offshore oilfield, part of a wider scheme in which the Swiss group Panalpina showered bribes on Nigerian officials, some on behalf of Shell, booking them as ‘evacuations’, ‘special handling’, and ‘prereleases’.23