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Posted on Friday, 21 March 2014 18:18

Samosas and illicit financial flows in Lusaka

Shauna Mottiar

Shauna's trip to Lusaka, Zambia where she attends an economic commission panel on illicit financial flows from Africa, leads to a number of revelations about the origin of illicit financial flows and some of the tricks used by the high and mighty to bamboozle vulnerable governments and connive with those who seek to exploit the weaknesses in international governance. But that is only the tip of the iceberg until she meets Katinka the investigative journalist.

 

"Fifty four Kwachas?" I asked in confusion. "For a hundred Rand?"
"Yes, Madam, our currency was recently adjusted." Answered the hotel cashier.
"Lost your visa card?" Enquired a cheeky voice. I turned around and came face to face with its owner. She was dressed in denim from head to toe and long, dark hair cascaded down her shoulders. She grinned. Her grin was cheekier than her voice.

5% of global illicit financial flows are due to political corruption, 35% to criminal activities and 36% to commercial transactions through multinational companies in the form of tax evasion and money laundering

"Oh no," I said, "I just like to have a bit of cash on me." This was true. As it happens I like to handle money and when I'm travelling I feel that local currency imparts an essence of local culture. When the Euro was introduced I remember feeling that it would be very sad indeed to travel in France and not to use Francs or to travel in Italy and not to handle Lire. It seemed as if something significant was being lost in this common currency, the Euro. "The Kwacha is stronger than the Rand." I added incredulously.

"Ah, you're South African." She nodded. "You get all uncomfortable when you realise your country might not be superior to other African countries." I opened my mouth to disagree but decided against it. She seemed to be rather enjoying herself. I was saved from having to respond at all when she was accosted by a large man in a grey overcoat who slapped her back in salutation and announced "You made it!" I politely moved out of the way and left the lobby.

I was in Lusaka to attend an economic commission panel on illicit financial flows from Africa. It is estimated that Africa loses some $50 billion a year through these illicit flows. The panel was made up of high ranking personalities and chaired by South Africa's ex-president Thabo Mbeki. As I took my seat in the conference room the next morning I noted how similar everyone looked wearing dark suits and sombre expressions.

From snippets of conversation I gleaned that the delegates seated near me were from Burundi, Somalia, and Madagascar and represented various government departments and some civil society organisations. It struck me that the room was filled with exactly the right people to deal with the problem of illicit financial flows from the continent.

Just as we were about to convene, denim girl from the lobby the day before tumbled into the room. She was, once again, dressed in denim from head to toe. She smiled and shook hands with several dark suited delegates as she made her way to a seat at the back of the room.

The session began with a discussion distinguishing between 'illicit financial flows' and 'capital flight'. The latter is understood as legal or illegal movement of funds abroad to secure better returns while the former refers to unrecorded capital flows from criminal, corrupt or commercial activities.

Research has revealed that five per cent of global illicit financial flows are due to political corruption (such as bribery and embezzlement), thirty five per cent to criminal activities (such as the drug trade and terrorist financing) and sixty per cent to commercial transactions through multinational companies in the form of tax evasion and money laundering. These figures caused quite a stir among delegates who all agreed that these practises needed to be better guarded against and that Africans needed to play a leading role effecting changes on their continent.

A delegate from Mauritius raised his hand. "In my opinion, the problem could be solved with adequate political will, effective laws and the right people to implement these laws." He stated imperiously. I blinked in surprise - I thought Mauritius was a tax haven? Just the other day I had bumped into an old varsity acquaintance at the airport. He dragged me off for a cup of coffee and boasted for half an hour about all the money he had made since graduation. He had secreted his wealth off shore he told me conspiratorially. Mauritius was one of those off shore destinations.

I stared at him wondering exactly how he had accumulated these monies. It all sounded rather suspicious to me. Of course he mistook my doubtful stare for one of admiration and continued the monologue. We should never forget what happened to the Jews in Germany or the Indians in Uganda he counselled, tapping my wrist. We should always be prepared. Not sharing his persecuted minorities' complex, I informed him that I preferred to bank in one place and that I believed in paying taxes. He shook his head sagely and pronounced that my idealistic methods would be my undoing. I smiled at the recollection as the Mauritian delegate finished speaking. Denim girl looked up from her laptop.

"That's reassuring." She commented.
"Yet Mauritius allows boutique 'tax planning' offered by accounting firms based there. Large American corporations maintain subsidiary units in the country. Mauritius has a financial services opacity score of 96 per cent, perfect transparency would yield an opacity score of 0 per cent!"

This response caused some low rumblings but the chair had already moved on to the next comment. This time it was a delegate from the Seychelles.
"There is no place for illicit activity in the Seychelles..." She began. There was an amused whisper behind me.
"Seychelles has an opacity score of 100 per cent...just like Switzerland." Denim girl was giggling delightedly into her keyboard.

A freudian slip

As we concluded the session for lunch I struck up a conversation with the delegate next to me and asked "Do you know who that is?" I indicated denim girl who was unplugging her computer and gathering up a mass of cables. "That's Katinka Firahs." He said with a smile.
"She's an investigative journalist - just wrote a brilliant expose on blood diamonds in Africa."
"Gosh, she looks so young." I marvelled, as Katinka extracted a peach from her laptop case glanced at it affectionately and took a large bite out of it.
"Yes, there's talk of her being nominated for the Pulitzer."

The Mauritian delegates were taken to task over lunch by participants who probed the view that Mauritius was an emerging tax haven. They argued however, that they came under the spotlight because their country happened to have a strong financial services sector. I looked around for Katinka but she had disappeared. The conversation ended on a lighter note when someone mentioned that a delegate had made reference to a 'safe haven' as opposed to a 'tax haven'. A Freudian slip?

The afternoon's discussions centred on illicit financial flows through commercial transactions such as mispricing and transfer pricing. Mispricing involves, among other things, under-invoicing exports to avoid duties. While transfer pricing allows a parent and subsidiary company (usually in another country) to trade goods and services at prices that do not reflect market value in order to siphon off pre-tax profits.

"Jersey is the main exporter of bananas to Europe but not a single banana tree grows there!" a delegate summed it all up rather well    

Towards the end of the session a member of the panel pointed out that there was very little research being conducted on flows through philanthropy or corporate social responsibility strategies. This was of particular interest to me.

Jersey is the main exporter of bananas to Europe but not a single banana tree grows there

'Philanthropy' is distinguished from 'charity' as effecting social justice rather than simply pitying the poor. Philanthropy therefore addresses root causes of social ills rather than focusing on the symptoms of these ills. Corporate Social Responsibility strategies often invoke the rhetoric of social justice: 'socioeconomic transformation' and 'commitment to communities'. Corporates very rarely achieve such goals however. It has been argued that philanthropic endeavours are simply not reconcilable with the 'bottom line'. But if Corporate Social Responsibility strategies are, in fact, being used to facilitate illicit financial flows this would cast corporate 'philanthropy' in a whole new light.

The conference closed late that afternoon but I calculated that I had enough time to visit downtown Lusaka and get a feel of the place. The taxi driver suggested the Levy Mall. Smiling at his more or less accurate summing up of me (I probably spend too much time at the mall) I nodded and climbed into the car. As we drove, I spotted two soldiers walking along the street. "Are they military?" I asked.
"Para-military." He replied. "They are sometimes in town when people are protesting."
"They've been protests?"
"Well, last month university students were protesting, because food and fuel subsidies were stopped. Most Zambians are very poor. We are a rich country – we have copper, but our people are poor."
The Levy Mall was rather interesting. I didn't get very much of a sense of being in Zambia because all the shops were South African! I stopped at a coffee place for a toasted sandwich when a tall, attractive woman approached me and complimented my jacket. She was clearly a fashionista. We chatted about fashion and shopping in Lusaka and she told me that the South African shops were considered the best places for fashionable purchases. There were however, places where original Zambian clothing was available. There was also a market where Chinese goods were sold – it was called Kamwala she said, with a turned-up nose.

Samosas in foil paper

I arrived back at the hotel a couple of hours later and made my way to the piano lounge. Several conference participants were there talking about the day's events. I joined in a few of the conversations and spotted Katinka sitting on an animal print ottoman in front of a large chess board. She seemed to be having a game of chess with herself.
"Hello." I said, "Mind if I join you?"
"Sure." She answered. "Do you play?"
"Not very well I'm afraid. I was turned away from the chess club when I was eight and have harboured a grudge ever since."
"Why were you turned away?"
"I suggested that we liven things up a little by painting the white pieces pink and the black pieces purple. The teacher wasn't amused." Katinka giggled. "I also argued that it wasn't fair to allow some pieces to move freely while restricting others." Katinka giggled again.
"And no one appreciated your instincts for equality?"
"Well my mother did. She wrote a firm letter to the school PTA demanding an explanation. But by the time they replied I had joined the debating club." As Katinka and I played a friendly game of chess (she was obviously going easy on me) I asked her about the investigative piece on blood diamonds in Africa which she had just published. She explained that she was critical of the Kimberly Process, an initiative set up to diminish trade in conflict 'blood' diamonds. "The Kimberly Process's definition of blood diamonds is too narrow." She said. "It doesn't include the most primary agents of conflict – governments! Nor does it include private corporations."
"But hasn't it significantly decreased trade in blood diamonds?"
"Not as long as it defines blood diamonds as solely those that are used by rebel movements to finance conflict. Zimbabwe's Marange diamonds for example, are controlled by the state and mined by the military and private companies in such a way that there has been mass looting, violent displacements of local communities and a string of human rights violations – totally bloody."

"Hello Katinka." Our conversation was interrupted by a slender, anaemic looking young man.
"Ahmed, hello." Replied Katinka. "Meet Shauna."
"You look very familiar." He said peering at me closely.
"Er, yes I saw you at the airport." I said.
"Oh, right - Katinka I'll see you later." He muttered, scampering off quickly. Katinka gave me a curious look.
"What happened at the airport?" She asked.
"Er, security gave him a bit of a hard time."
"What did they do?"
"They went through his luggage."
"Why?" I sighed as I realised that I was being grilled investigative reporter style and would have to recount the entire story.
"I think the scan picked up foil paper in his suitcase."
"Foil paper?"
"Silver foil, you know – used for cooking."
"Yes, I know what it is. Why did he have foil paper in his suitcase?"
"Er, he had food wrapped in it."
"Like a sandwich?"
"Er, samosas."
"So he was harassed because he happened to bring along his lunch. Could it have been racial profiling?" I shifted uncomfortably in my seat.
"I don't think so."
"Why not?"
"There were a lot of samosas."
"What do you mean?"
"There were enough samosas to feed an army." I spluttered, abandoning all tact. "They were perfectly foil-wrapped in dozens, stacked upon each other at the bottom of his suitcase and there was even chutney, also wrapped in foil!" Katinka exploded with laughter and I joined in.
"Stereotyping! Worse than profiling." She said.



Shauna Mottiar

Shauna Mottiar

Shauna Mottiar is Senior Research Fellow at the Centre for Civil Society,UniversityofKwaZulu- Natal. She has a PhD in Political Studies from the University of theWitwatersrandand her research interests include civil society, social movements and social protest. She currently manages the Centre for Civil Society Philanthropy and Social Entrepreneurship project focusing on the role of philanthropy in social justice and social change.

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