Anthony Trollope’s satirical novel The Way We Live Now (1875) contains a character by the name of Augustus Melmotte. A crooked financier of shadowy origins, Augustus has absconded from Paris with an enormous fortune, having orchestrated some highly lucrative swindles. Seeking refuge in London, Melmotte sets himself the task of buying his way into the British establishment. He curries favour with profligate nobles by paying off their debts. He hosts a lavish party for a foreign dignitary, which the Prime Minister agrees to attend. He spends, promises, insinuates, pays. He stands for election as an MP, and he wins. Melmotte reveals himself, at every turn, to be boorish, violent, cruel and dishonest. “Nevermind!” quoth Great Britain, “He is rich.”:
The new farthing newspaper, “The Mob” was already putting Melmotte forward as a political hero, preaching with reference to his commercial transactions the grand doctrine that magnitude in affairs is a valid defence for certain irregularities. A Napoleon, though he may exterminate tribes in carrying out his projects, cannot be judged by the same law as a young lieutenant who may be punished for cruelty to a few negroes. “The Mob” thought that a good deal should be overlooked in a Melmotte, and that the philanthropy of his great designs should be allowed to cover a multitude of sins.
Though he is thwarted, in the end, by a pertinacious lawyer (this is, after all, a Victorian novel), Melmotte epitomises the power of dirty money, which corrodes not just political integrity, but the most basic values of a healthy society.
There are plenty of Melmotte-esque figures to be found in the real world and thinking of modern-day examples is quite easy. The first names that spring to mind are likely to be Russian, particularly in view of the war in Ukraine, which has amplified concerns about nefarious oligarchs and their influence on western democracies. Had Trollope lived to see Evgeny Lebedev awarded a peerage by Boris Johnson, a wry smile would no doubt have tugged at his lips, for while Melmotte had sometimes idly dreamed of a title, even he didn’t manage to pull that one off. Yet though the dangers of corrupt cashflows from Moscow are well recognised, there is another region which is viewed rather differently, for the most part, though it pours even larger and even dirtier quantities of money into the west. That region, as a book published earlier this year attests, is Africa.
On the Trail of Capital Flight from Africa: The Takers and the Enablers is a collection of essays edited by Léonce Ndikumana and James K. Boyce, two economists at the University of Massachusetts Amherst. As the slightly long-winded title suggests, the book addresses the problem of capital flight, and includes case studies of Angola, Cote d’Ivoire and South Africa. Capital flight is a strange term which, though widely used, has evaded a settled definition. It is often used in connection with hot money flows—when capital is rapidly withdrawn from a particular economy and placed abroad for safety amidst financial or political turmoil. In On the Trail, however, capital flight “refers to capital outflows that are illicit by virtue of illegal acquisition, illegal transfer, and/or illegal concealment from tax authorities.”
These illicit transactions are not, of course, recorded in official statistics (the beneficiaries have, like Melmotte, a good many things to hide), which means that the scale of capital flight from Africa can only be estimated. But if the estimates in On the Trail are even moderately accurate, this topic deserves a great deal of attention. Empirically, the standard measure of capital flight is the so-called balance of payments residual—the difference between recorded sources (inflows) and recorded uses (outflows) of foreign exchange. In theory, since every purchase of a given currency implies an equal and opposite sale by someone else, the foreign exchange that accrues to a country over a certain period—through export sales, international borrowing and so on—should be exactly matched by the foreign exchange used by that country over the same period to pay for imports, make investments abroad, service debt etc. This is an accounting identity, something true by definition. If inflows at any time exceed outflows, then, the residual outflows must still have occurred. Maybe they were miscounted, or there was a mistake in the records. Or maybe they happened secretly.
Between 1970 and 2021, Ndikumana and Boyce estimate, the African residual amounts to $2 trillion. If we begin in 2000, it stands at $600 billion. These numbers are far too large to be attributable to measurement errors. They suggest capital flight on an epic scale. To put this into context: if you had $2 trillion in 2020, you could have paid the long-term cost to the US of the Iraq War, bought out all of Apple’s shareholders or purchased the entire national product of Burundi for the next 885 years or so. More money left the continent illicitly over this period than would be required to service all its outstanding external debt, making Africa, strange as it may seem, “a net-lender to the rest of the world.” Though millions of its inhabitants live in grinding poverty, Africa is far from a poor continent, properly considered. Its riches are simply looted and sequestered abroad.
On the Trail is replete with information as to how this shadow economy operates—where the money comes from, where it goes, who benefits, who facilitates. Journalist Nicholas Shaxson, in his essay on Angola, suggests that one can think of the system as a collection of “transnational networks of plunder.” There are the “Takers”—local elites with political access, who seek to monetise their power and influence; and then there are the “Enablers”—“the bankers, accountants, law firms, intermediaries and, of course, the global infrastructure of offshore tax havens. The transnational networks are not mere passive handlers of capital flight that would have happened anyway: they solicit, encourage, and amplify its scale.” Whether it’s oil in Angola, cocoa in Cote d’Ivoire or diamonds in South Africa, power allows you to grab more than your fair share; international banks allow you to move it abroad; tax havens and shell companies allow you to hide your loot from prying eyes and prosecutors.
The most striking aspect of this collection, however, is not its forensic exploration of the methods of capital flight, nor its discussions of notable examples—though the interested reader will find no shortage of technical detail concerning the under-invoicing of exports, the over-invoicing of imports and the kickbacks refracted through webs of shell companies that funnel public resources to private accounts abroad. The chief strength of the book is that it provides a refreshingly unorthodox portrait of modern Africa and its problems. By directing attention to transnational networks and financial opacity on a global scale, the authors argue convincingly that the looting of Africa cannot be viewed in isolation but is one facet of an international problem—inseparable from western concerns about the infiltration of Russian money, for example, or tax evasion by corporations and the ultra-wealthy.
That capital flight from Africa harms Africans is obvious—it hollows out the tax base, impoverishes public services and floods the slush funds and patronage networks that keep odious regimes in power. But it can harm the west as well. Shaxson, in the Angola piece, provides a striking example of this, which he describes as “blowback.” Angola was a Portuguese colony until 1974, when independence was quickly followed by a decades-long civil war from which the Movimento Popular de Libertação de Angola (MPLA) emerged victorious. The country is blessed—or cursed—with plentiful oil reserves, the revenues from which have been largely appropriated by the MPLA elite who control Sonangol, the nominally state-owned oil company. In 2001, one of Portugal’s largest banks, Banco Espírito Santo (BES), incorporated an Angolan subsidiary controlled by MPLA heavyweights, who wasted no time in granting unsecured loans to mysterious front companies—of which they themselves appear to have been the ultimate owners. By 2014, $5.7 billion was reportedly missing, and the central bank had to come to the rescue of Portuguese savers by bailing out BES and breaking it apart.
The river of dirty money that flows from Africa to the west pollutes, in other words, both source and estuary. But the consequences for countries on the receiving end are not always so direct as in the BES affair, as several of the essays in On the Trail point out. Western real estate, for example, has proved highly attractive to crooks and kleptocrats, whose property-buying sprees drive up rental and housing costs to the detriment of Londoners, Parisians and New Yorkers. The transnational networks that facilitate capital flight also serve as vehicles for tax evasion and offer concealment and money-laundering services to those in the business of organised crime. These networks, Ndikumana and Boyce argue, “transform national borders from a constraint into a shield … Borders act as a semi-permeable membrane, allowing free movement of commodities, money, and people with the right credentials, but obstructing the reach of the rule of law.”
This internationalist perspective on illicit capital movements runs counter to the orthodox left-wing narrative that the exploitation of Africa is a form of neo-imperialism. According to this view, European empires may have relinquished direct political control, but the imperialist structure of the world economy has continued unabated. Corporations have taken the place of the colonists, and they continue to bleed Africa dry, aided by the latter-day mandarins who now govern the continent on their own. This narrative infuses Tom Burgis’ otherwise excellent 2015 book The Looting Machine, which covers similar ground to On the Trail. “The plunder of southern Africa began in the nineteenth century,” Burgis writes. “As European colonialists departed and African states won their sovereignty, the corporate behemoths of the resource industry retained their interests.”
Such arguments are not entirely without merit, particularly if one focuses on the mining and resource sectors, as The Looting Machine does. But the gloomy subtext of this story is that nothing can be done to make things better. Stop mining and the fragile resource-states will only be further impoverished. Pushing for inclusivity, or for the “equitable involvement of local partners,” tends to make potentates of a few well-connected Africans, while pauperising the rest. (This is precisely what has occurred in post-apartheid South Africa, as both The Looting Machine and On the Trail explore.) What else is there to suggest? Abolishing corporations? Overthrowing capitalism? Since these are not practical ideas, we must content ourselves, as we await the revolution, with pangs of occasional guilt for the Congolese metals encased in our gadgets and the Ivorian cocoa baked into our cakes. We have lost sight, however, of the global picture.
There is a growing recognition of the connection between the stolen wealth of Africa and the global menace of tainted money, a trend that Burgis himself has done much to encourage. It is a central theme of his 2020 bestseller Kleptopia: How Dirty Money is Conquering the World, which tells of how “the kleptocrats of the world [are] uniting.” The African looting machine is here depicted as just one tendril in a system of globalised corruption stretching from Putin’s Russia to the City of London. Money is hoovered up in places where the strong can simply take what they want and stashed in the west where, Melmotte-like, it undermines the rule of law. A Kazakh dictator leans on a French president to get Belgian criminal law altered for the benefit of his oligarchs. A Swiss-Italian bank in London launders cash for a Russian gangster, while the regulatory authority agrees to look the other way. A London-listed company defrauds its investors through shady deals with a Congolese state-owned mining company. Burgis’ book is filled with such disquieting stories—blowback indeed.
“Plate sin with gold,” says Shakespeare’s King Lear, “and the strong lance of justice hurtless breaks.” This holds in real life too, in Africa as well as in the west. In the age of empire, Africa was subjugated for the benefit of her colonial masters: her loss was always their gain. This no longer quite holds true—the system that currently feeds on the impoverishment of Africa serves only the multi-ethnic lords of Kleptopia. If the west were to get tougher on secrecy jurisdictions, demand more transparency from financial institutions or make it harder for shell companies with secret owners to operate, it would not only make Africa more difficult to steal from, but western democracies less fragile. There is no panacea for injustice and corruption. But there is room for some solidarity here, between westerners and Africans—a solidarity that may be more productive than the mixture of guilt and impotence which, according to the neo-imperialist story, every westerner with a conscience should feel. On the latter-day Melmottes stand to lose if we make it slightly harder for them to gild their sins.