A conflict of interests?

Published: October 15, 2009

Foreign Direct Investment

(Read the original article here)

A corruption case in France against three African leaders has thrown into question the economic relationships between developed countries and their former colonies, reports Michael Deibert.

A court case brought against three west African heads of state by an anti-corruption group has sparked debate in Europe on the economic relationships between European governments and their former colonial possessions.

The case was brought in December 2008 by the French branch of anti-corruption group Transparency International. It alleges that president Denis Sassou Nguesso of the Republic of Congo, president Teodoro Obiang Nguema of Equatorial Guinea and president Omar Bongo Ondimba of Gabon (who died in June 2009) looted public funds to buy luxury homes and cars abroad. Though representatives for the three leaders were unavailable for comment to fDi, they have denied the accusations in their respective local media.

The accusations have set up a tense legal wrangle in France, which claimed both Congo (often referred to as Congo-Brazzaville to distinguish it from the far larger Democratic Republic of Congo) and Gabon as colonies until 1960. Though a French magistrate agreed in May to launch a probe into the leaders’ assets, the Paris prosecutor’s office has appealed in an attempt to have the investigation halted.

“It shows that not all judges in France are willing to abide by governmental or diplomatic interests, and that they are willing to find out how these people were able to buy these assets,” says Jacques Terray, vice-chair of Transparency International France. “We hope that this will be a precedent for other countries.”

A decision regarding attempts by the Paris Public Prosecutor’s office to halt the investigation – arguing that Transparent International does not have the right to file it as the organisation itself was not a victim of wrongdoing – is scheduled to be issued by a board of inquiry on October 29.

Turbulent history

The trio of countries at the heart of the case all tell a similar story of a surfeit of natural resources and stunted political development that has kept most of the region’s citizens politically disenfranchised and economically impoverished to the benefit of a select few.

Gabon’s former president, Mr Bongo – who was Africa’s longest-serving ruler – was educated largely in Congo, at the time called French Equatorial Africa. A political chameleon, Mr Bongo shifted from running an authoritarian one-party state to participating in relatively free, if flawed, elections.

Accusations of government corruption in Gabon’s oil industry, which accounts for more than half of the country’s GDP, have long been rife, and a 1999 US congressional investigation into Citibank revealed its personal accounts held more that $130m of Mr Bongo’s money. A 2007 French investigation of real estate owned by the president and his family turned up holdings in France worth an estimated $190m.

For its part, Congo saw a series of coups and assassinations from independence onward, with the country ruled by the Marxist-Leninist Marien Ngouabi from January 1969 until his murder in March 1977, and current president Mr Nguesso finally seizing power in 1979. In 1992 he lost a democratic election to Pascal Lissouba but by 1997 had returned to the presidency with the support of the Angolan army in a civil war estimated to have claimed at least 10,000 lives. A peace agreement signed by the Nguesso government with various rebel factions in 2003 is still considered to be fragile.

Equatorial Guinea, meanwhile, gained independence from Spain in 1968, at which point Francisco Macías Nguema assumed power. In August 1979, Mr Nguema was ousted and executed by his nephew, Teodoro Obiang Nguema, who has ruled the tiny nation ever since, setting about creating a cult of personality to rival anything seen in Africa.

While state radio praises Mr Nguema as being “in permanent contact with the Almighty”, earlier this year gunmen attacked the national presidential palace. A 2004 plot by foreign mercenaries ended in some people, including British nationals, facing jail sentences of more than 30 years.

Though the three nations are all major oil exporters, foreign investment in the region is hardly limited to the oil sector.

The German energy utility Eon and Spain’s Union Fenosa have recently inked agreements to turn Equatorial Guinea’s Bioko island into a centre for gas exports, not only for the country itself but also for neighbouring Nigeria, the seventh largest holder of natural gas reserves in the world.

Because of a facility constructed by Houston’s Marathon Oil in 2007, Equatorial Guinea at present exports nearly 3.7 million tonnes of liquefied natural gas a year. Such substantial foreign investment could be jeopardised if the lawsuit calls into question the legitimacy of trade with Equatorial Guinea.

Diamond industry

In a further diversification of the region’s economic role, in 2007 Congo was readmitted to the Kimberley Process, which aims to stem the flow of conflict diamonds, after having been expelled from the then year-old process in 2004 for falsifying certificates of origin and exporting diamonds from its war-wracked neighbour, the Democratic Republic of Congo. The case is politically sensitive in France, as well, given the country’s long and tangled history with sub-­Saharan Africa.

During the 1981-95 government of François Mitterrand, France was the main international backer of the ethnic Hutu dictatorship of Juvénal Habyarimana, the Rwandan leader whose assassination in April 1994 served as the opening shot in the genocide that swept through Rwanda that year. Policy towards Africa under Mr Mitterrand’s successor, Jacques Chirac, was also marked by a high degree of French business interests, with only muted calls for economic and political reform.

During a 2007 trip to Senegal, French president Nicolas Sarkozy called for an end to Franco-African diplomacy based on personal relations between leaders and rather for a “partnership between nations equal in their rights and responsibilities”. However, in the five trips Mr Sarkozy has made to Africa in the past three years, his criticism of corruption in regions where French companies have extensive investment has been minimal.

Changing relationships

“In a larger context, this case is in a sense an end of the France-Afrique foreign policy which has gone all the way back to the time of DeGaulle,” says Sebastian Spio-Garbrah, west Africa analyst for the Eurasia Group, a political risk research and consulting firm based in New York. “Apart from Guinea, all the countries [in west Africa] more or less agreed to remain within the Francophone zone, and the French government had to protect or have a paternalistic relationship with these people.”